First Mover Americas: Bitcoin Dumps Below $30K as Morgan Stanley Calls Out Liquidity Pressures

Good morning, and welcome to First Mover. I’m Bradley Keoun, here to take you through the latest in crypto markets, news and insights. (Lyllah Ledesma is off.)

• Price Point: Bitcoin and cryptocurrencies were tumbling on Tuesday, quickly losing what had seemed to be a fresh burst of momentum on the prior day.
• Market Moves: The Wall Street firm Morgan Stanley steps back and assesses the liquidity pressures recently hitting crypto markets, Will Canny reports.

Price Point

Bitcoin (BTC) was dumping on Tuesday, just a day after a price push past $31,500 kindled hopes that recently slumping cryptocurrency prices might have hit a bottom.

"The market dynamics this Tuesday morning are a reminder that the market cannot now rally again as it did in 2020," Alex Kuptsikevich, senior market analyst at FxPro, wrote in an email. "In our view, the bitcoin bear market is not over yet."

As of press time, the largest cryptocurrency was changing hands around $29,400, down 6% in the past 24 hours.

More than $200 million worth of positions on derivative exchanges were liquidated in the past 24 hours, according to Coinglass, CoinDesk's Oliver Knight reported.

Katie Stockton, managing partner of the technical-analysis firm Fairlead Strategies, wrote in a report that "long-term momentum remains to the downside," with support seen at $27,200.

Cryptocurrencies sold off broadly on Tuesday. Among the biggest losers were Solana's SOL token (-13%), Avalanche's AVAX (-13%) and Cosmos' ATOM (-9.7%).

The slide in bitcoin came as U.S. stock futures tumbled in overnight trading. There are renewed fears among investors of more central-bank monetary-policy tightening to control inflation.

Gold was higher, around $1,849 an ounce, and crude oil was holding steady at $118 a barrel.

Market moves

The Wall Street firm Morgan Stanley says crypto is getting hit by shrinking liquidity, Will Canny reports for CoinDesk.

Weakness in crypto markets, the failure of a dollar stablecoin and a reduction in leverage in decentralized finance (DeFi) are resulting in the “crypto equivalent of quantitative tightening,” Morgan Stanley (MS) said in a report Tuesday.

The recent collapse of stablecoin terraUSD (UST) saw USDT$1,0002 also lose its dollar peg intraday, and this caused crypto prices to drop further as some questioned the stability of the third-largest cryptocurrency, the bank said.

Investors are redeeming USDT at a record pace, the bank said. Some $10.6 billion of redemptions occurred in the last month alone, while other stablecoin issuance is not rising.

“Systemic spillover” risks from the crypto markets to the fiat banking system appear limited, the bank said, because the leveraged crypto companies usually borrow from each other. However, if USDT falls materially under its $1 peg, this would have a larger negative impact on crypto and risk markets.

Link to full story: Morgan Stanley Sees Crypto Equivalent of Quantitative Tightening

Latest Headlines

• Jewel Bank Approved as Bermuda's First Digital Asset Bank as Premier Burt Readies to Take Nation Into Stablecoins The Bermuda Monetary Authority (BMA) issued full-bank and digital asset business licenses to Jewel, which plans to issue a USD stablecoin and other single fiat currencies.
• Blockchain Network Cronos Launches Accelerator Program to Support DeFi, Gamefi Startups The Crypto.com-backed blockchain is inviting developers to apply for its 10-week startup program, which includes funding and mentorship opportunities for early-stage projects.
• Investors View Polkadot as an Alternative Layer 1, Coinbase Says The market cap of Polkadot’s DOT token relative to ether has been falling since November, according to the report.
• Fireblocks Deepens Payments Push With Checkout.com USDC Settlement Merchants will be able to settle transactions through USD coin with Fireblocks’ payment technology.
• Lightning Network Startup Mash Raises $6M Seed Round The money will go toward advancing efforts to monetize content by creators, builders and developers on a “pay-as-you-enjoy” basis.
• Binance Refutes 'Skewed' Money Laundering Claims Binance has hired senior investigators from the IRS' cybercrimes unit over the past three years to improve its crime prevention.
• Argo's May Bitcoin Output Drops 25% From April Amid Teething Problems at Texas Facility Argo said the decline also reflected an increase in mining difficulty on the Bitcoin network.
• Key US Senators Introduce Crypto Bill Outlining Sweeping Plan for Future Rules Sens. Kirsten Gillibrand and Cynthia Lummis release the long-awaited strategy that favors the CFTC as a watchdog and wipes away tax worries from buying things with cryptocurrencies.
• BlockFi Valuation Sinks to $1B in Latest Funding Round: Report BlockFi raised $350 million at a larger valuation of $3 billion in March last year.
• Bitcoin Tumbles Back Below $30K as Bullish Momentum Wanes Over $200 million in positions have been liquidated following a second sharp drop for bitcoin in seven days.
• Indonesian Exchange Pintu Raises $113M to Meet Country's Crypto Boom The exchange previously raised $35 million in a Series A extension last August.
• Even Giants Started Out Small: Cooperation and the Early Days of Bitcoin What the new Baylor Bitcoin study really says (and what it really doesn’t) about Satoshi and company.
• The Decentralized Mystique New academic research on Bitcoin’s early years undermines its foundational myths of privacy through pseudonymity and decentralization, Jaron Lanier and Glen Weyl write.
• New Research Unearths Insights Into Satoshi and Bitcoin’s Early Days The paper makes no claims about the Bitcoin network today, more than a decade after the end of the period analyzed. But it underscores well-known and longstanding privacy challenges.

Today’s newsletter was edited by Bradley Keoun and produced by Parikshit Mishra and Stephen Alpher.