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HomeAltcoin NewsThe crypto market dropped in May, but June has a silver lining

The crypto market dropped in May, but June has a silver lining

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May 2022 was not for the faint-hearted. Even the most embattled and experienced crypto traders were tested in the first two weeks of the month on a brutal drop following the United States Federal Reserve’s announcement that interest rates would be rising by 0.5%.

Crypto used to exhibit a lower correlation with real-world events and was generally unaffected by capitalistic successes and failures. However, a very steady approximate peg between Bitcoin (BTC) and the S&P 500 index was seen throughout the first five months of 2022. Inflation and war fears have not been kind to both markets either.

Crypto mimicking the equity market could be due to the massive market capitalization growth in 2020 and 2021. At unprecedented rates, retail investors from equities have flocked to cryptocurrencies, causing far greater overlap in price movements.

Bitcoin dipped below $29,000 before coming back up to $31,800 on May 31, while Ether (ETH) fell to just above $1,700 before reclaiming prices above $1,900 by May 30. But many altcoins fared far worse, and the resulting reactions from once-patient traders turned to about as much FUD as one would imagine.

Four stablecoins, two different directions

TerraUSD (UST) was a stablecoin built on the Terra blockchain and sitting in the top six stablecoin by market cap. However, on May 9, the coin, which was designed to maintain a $1 value all the time, progressively dropped down to $0.29, leaving the crypto world in shock. Its price has not recovered since.

As for how this impacted the rest of the stablecoin landscape, a major “shuffling of the deck” resulted from a trusted stablecoin’s reputation imploding overnight. Tether (USDT), the largest stablecoin by market cap, saw a fall of its own, albeit one much less drastic, to $0.95. It has since recovered, but there have been renewed claims about the coin’s solvency.

Dai and USD Coin (USDC) seemed to reap the reward amid the debacle as the above chart clearly indicates the top 10 largest whale addresses from each stablecoin show an increased trust level in these two assets, and coins moving in massive waves onto exchanges from USDT and UST (now TerraUSD Classic). Binance USD (BUSD) also can’t be ignored, as the third-largest stablecoin grew to a nearly $19-billion market cap last month.

LUNA’s tragic fall from grace

UST’s sister token LUNA Classic (LUNC) plunged from its all-time high of about $119 just seven weeks ago and now sits at a staggering $0.000125, equating to a -99.9999% decrease in price and market cap. UST’s depegging from $1 appeared to be the final nail in the coffin as the algorithm wasn’t swift enough to burn LUNC when UST was in freefall due to large withdrawals on the Anchor Protocol.