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Bitcoin fell as much as 6% on Thursday, close to below USD27'000, the lowest since December 2020. The key question is whether it will be able to regain its key support level of around USD29'800. The downfall of the stablecoin UST has impacted the crypto market and it is unclear if markets are close enough to peak capitulation in order to rebound. There are some signs of capitulation such as forced selling and markets are largely oversold after falling rapidly. 

The prices of Luna (LUNA) and its related stablecoin TerraUSD (UST) are in freefall at the moment, as the entire project appears to stop working. UST is an algorithmic stablecoin that was pegged to the US dollar. Over the last few days that mechanism seems to be broken down, with investors rushing to the exit. Even though the Luna Foundation Guard, a non-profit set up to support the Terra ecosystem, deployed USD1.5 billion in assets on Monday to help the stablecoin return to its peg, it has not been enough.

Bitcoin is rebounding from an earlier brief collapse below USD30'000 as the selling pressure on risk assets moderates. The world’s largest digital token is adding 5% so far trading around USD32'600. Rising real rates led by Fed's tightening monetary policy to combat inflation are creating an obstacle for speculative assets like cryptos. Whether the calm will last is an open question. Coinbase is expected to release earnings after market close, potentially offering some clues on institutional interest. 

Extreme fear is pushing traders to sell all risk assets together: stocks, commodities, and crypto. The Crypto Fear & Greed Index is heading back into the "extreme fear" zone, and funding rates data from Coinglass confirmed the majority of market participants expect shorting to be a profitable next trade. If prior March lows and already very negative sentiment are any indication, the level of USD38'000 could likely hold. If it doesn't the next major support level is around USD36'000. If the market turns, major resistance stands at USD40'000. 

Bitcoin (-2%) and other cryptocurrencies were down yesterday after the US Federal Reserve outlined a plan to raise rates faster to curb inflation. While the largest cryptocurrency has been on a rising trend since mid-January, Fed's aggressive tightening plan remains a major headwind. Yesterday's session shows the price dropped sharply as it hit the EMA resistance line, indicating sellers didn't hesitate to sell as soon as they had the opportunity.