Bitcoin Price Breaches Key Level; Do Kwon-Backed Stablecoin Slips

A swift selloff over the weekend in two tokens associated with Do Kwon highlighted weakness in the broader crypto market, as Bitcoin price slid through a key support level.

Bitcoin, the biggest cryptocurrency by market value, broke through a key support level to trade around $34,450, its lowest since January. (REUTERS)

A swift selloff over the weekend in two tokens associated with Do Kwon highlighted weakness in the broader crypto market, as Bitcoin price slid through a key support level Sunday to almost a four-month low.

The value of TerraUSD or UST, an algorithmic stablecoin that aims to maintain a one-to-one peg to the dollar, dropped below $1 to its lowest level in almost a year, pricing from CoinMarketCap showed.

UST's algorithmic stablecoin efforts are being closely watched by both skeptics and supporters, said Kunal Goel, research analyst at Messari. Its roughly 1% decline over the weekend might seem relatively restrained given overall crypto volatility, but the market appears to be bracing for another leg down, he said.

Kwon, who is currently based in Singapore, wrote on Twitter that he woke up to an “amusing morning” on Sunday. In a now deleted tweet seen by Bloomberg, Kwon seemed to hint that the selloff may have been an orchestrated effort to make UST lose its peg. He also retweeted from his verified handle a tweet by a user named Caetano Manfrini claiming that a single player dumped 285 million UST on platforms like Curve and Binance.

Trading volume in UST rose some 300% in the past 24 hours, according to CoinMarketCap data. On-chain data from Etherscan showed that a crypto whale swapped nearly 85 million UST for almost the same amount of USDC, a stablecoin issued by Circle. 

The Luna token, which is designed to help UST maintain that dollar peg, was trading down more than 14% at $62.64 on Sunday after falling more than 12% on Saturday.

Bitcoin Woes

Bitcoin, the biggest cryptocurrency by market value, broke through a key support level to trade around $34,450, its lowest since January and a decline of more than 25% year to date.  

“Bitcoin did not hold key support and now has upped chances for a large drop,” Rick Bensignor of Bensignor Investment Strategies wrote in a note. 

“Last week the weekly cloud's Lagging Line did NOT hold above the bottom of its cloud at $36,870. I warned that that cloud breach could easily and quickly lead to a $10,000 drop. The bulk of crypto holders are “Hopers”, and they will sit on their longs regardless of what price action suggests,” he wrote.

Bitcoin has largely followed the negative trend in equity markets as investors across asset classes respond to signals of further interest rate rises. 

“Bitcoin has no counter-trend signals at this time, but the equity market does look poised to rebound next week, which we hope will carry over to cryptocurrencies,” Katie Stockton, managing partner at Fairlead Strategies, said in a note.