The Terra Effect
Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
Bitcoin’s charge beyond $45k resistance persisted this week, as the leading crypto attempts to overcome selling pressure above $48k. With Q1 drawing to a close, BTC has finally managed to net positive returns in 2022 after opening the year at $46k. The recent rally has been sustained by Terra founder Do Kwon’s consistent buys to the tune of >$125m at a time. Tellingly, after Do Kwon temporarily paused purchases as BTC climbed above $48k, the digital asset has seen a $2k decline which now finds it retesting the upper bounds of the trading range from which it just emerged. While the correlation may be significant, it’s also worth remembering that retests of previous resistance levels are healthy, especially following drawn out periods of consolidation. Should BTC successfully confirm the key $45k level as support, it could provide a solid foundation for a further breakout.
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Alts Rising
The optimism of the current rally has seen the crypto sector as a whole reclaim a $2T valuation, propelled both by Terra’s purchases and the rapidly growing momentum behind Ethereum’s upcoming merge. Alongside the bullish sentiment pervading market leaders, altcoins have rallied with force, with BTC’s dominance dropping by 2% since March’s open, currently occupying 42% of the industry’s market share. Impressively, the total altcoin market cap - excluding BTC and ETH - has surged by almost 27% since mid-March to claim an $800B valuation at the time of writing.
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Assault on Ronin
No week in crypto would be complete without a flurry of high drama. On Tuesday, Sky Mavis, publishers of P2E pioneer Axie Infinity, revealed that the ecosystem’s native Ronin network had been exploited, with hackers making off with 173,6k ETH and 25m USDC. At current prices, the lost funds amount to >$620m, potentially constituting the largest hack in DeFi history. The exploit marks one of at least three major attacks on decentralised networks this year, fresh off the heels of cross-chain bridge Wormhole’s $322m breach in early February.
Forward focus
Both the Ronin exploit and Do Kwon’s disproportionate market influence continue to underpin the oft-forgotten fact that crypto, even at a $2T valuation, still has a long way to go on the path to maturity. The rapid pace of development and ever-shifting narratives in the space have necessitated a culture of “testing in prod”, allowing the community to address bugs in products through network usage. However, the inherent competitiveness of crypto at present can result in products being deployed that may be easily manipulated by sophisticated malicious actors. The same is true of any emerging technology, as minds around the world compete and collaborate to build out potential use cases and applications with real-world value, all while refining and improving the tech itself. Market maturation may come at the cost of lower volatility and far less exponential gains, but, once realised, we may finally see Satoshi’s dream thrive in a secure, seamless, decentralised environment.