Over $1.2 billion worth of the flagship cryptocurrency Bitcoin ($BTC) have been moved to cryptocurrency trading platforms amid a wider cryptocurrency market downturn that has seen Terra’s LUNA lose over 85% of its value in 24 hours.
According to crypto analytics firm Santiment, a net sum of around 40,620 BTC, worth over $1.2 billion, has moved to cryptocurrency exchanges, marking the largest exchange inflow spike since December 2019 and marking “maximal crowd polarization.”
As Daily Hodl reports, Santiment has in the past revealed that large upticks in exchange inflows tend to lead to an average price drop of 5% for cryptoassets. The market downturn comes as the value of Terra’s algorithmic stablecoin UST plunges.
The stablecoin is currently trading at $0.45, while LUNA has dropped to less than $4. The cryptocurrency’s all-time high was near $120 last month. LUNA’s freefall puts its market capitalization below that of UST, which potentially throws the foundation of the stabilizing mechanism into jeopardy. A Terra bank run could now mean some users are no longer able to redeem their $1 of UST for $1 of LUNA.
The collapse comes after the Luna Foundation Guard (LFG) deployed all of its Bitcoin reserves meant to back the stablecoin. Professional market makers were said to be using the BTC reserves to defend UST’s dollar peg on protocols like Curve, which allow traders to swap between UST and other currencies.
Despite the bearish sentiment, Santiment has noted that both the flagship cryptocurrency Bitcoin and the second-largest crypto by market capitalization, Ethereum ($ETH), have seen their prices approach a “historic buy zone,” in which they see an “extremely high probability of a bounce.”
As CryptoGlobe reported, Bitcoin’s crash has seen 40% of investors in the cryptocurrency sit on unrealized losses. According to on-chain analytics firm Glassnode, network profitability defined as a “drop in the percentage of addresses, entities and/or supply in profit,” when BTC was trading at around $33,800 between 60% and 62% of BTC investors were in a state of profit, meaning around 40% were sitting on unrealized losses.
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
Featured image via Pixabay