TerraUSD’s (UST) and
Luna’s crash is perhaps one of the most unexpected events in the cryptocurrency
market. While there was a lot of optimism about Luna’s future and the
ecosystem, the Terra venture still somehow nearly ended.

 

Seeing what happened,
now may be an excellent time to reexamine any expectations you have about
stablecoins. So here are four lessons to note from the collapse of UST and
Luna.

 

Crashes are Almost
Immediate

 

Being an algorithmic
stablecoin, the UST is pegged to the value of a steadier asset, the greenback.
However, that peg broke when the market was in a downtrend, pushing its value
as low as 4 cents. And since the UST has a strong correlation with Luna, its
sister token also lost around 90% of its value.

 

That slump occurred
only in hours, and some investors could not have enough time to make their
exit. That is why being alert and ready is crucial when you’re faced with
events such as this. One good move is to use stop-loss and take-profit orders
on your open positions.

 

Stable Reserves are
Vital

 

Stablecoins aims to
provide the benefits of the cryptocurrency’s speed and decentralization and the
fiat currency’s stability in value. However, the well-known stablecoins today
don’t follow a completely decentralized model.

 

Meanwhile, UST is an
algorithmic stablecoin that uses an alternative model. Instead of dollars
backing the token, the model made UST programmatically supported by the crypto
Luna.

 

UST holders can always
exchange their stablecoin for a dollar worth of newly minted Luna. Conversely,
investors can redeem their Luna holdings for a UST equal to the dollar value of
Luna redeemed.

 

That system resulted in
arbitrage incentives like the USDT that regularly redirected the stablecoin’s
market price to one dollar.

 

However, UST’s
stability and liquidity were not as strong as the real dollar. If many UST
holders were to exchange their holdings simultaneously, Luna’s value could take
a steep dive after exchanges were swamped with a great deal of supply. That,
unfortunately, is what exactly happened this month.

 

The UST could have
avoided such a situation if it was supported by an asset with a more robust
market and less unstable value when pressured.

Major Crypto Players
Can Still Fail

 

The UST’s and Luna’s
crash supports that cryptocurrency assets remain highly risky. While cryptos
like Bitcoin, Ethereum, and Cardano are already significantly valuable, they
still carry a lot of risks.

 

Like other assets,
cryptocurrencies are not entirely safe. Technical malfunctions, hacks, or
conflicts can disrupt the crypto market. As a result, even major crypto players
are at risk of experiencing sharp declines and losing their credibility.

 

Choose Value Over Hype

 

UST’s and Luna’s
misfortune proves that several professional investors don’t have much helpful
information about what is safe and not in the cryptocurrency space.

The reliability of an
investment is not based on its market value. While the majority is going where
the money is, that doesn’t mean you should do the same. Remember, using due
diligence is crucial.

 

UST failed due to a
flawed arbitrage mechanism that nearly everyone can analyze from the start.
Previous coins that used similar mechanisms were tested and failed several
years ago. That information, however, did not concern most investors.

 

So when they had the
chance to leave before the collapse took place, many investors could not do
their research and make the necessary preparations.

This article was written by ForexLive at www.forexlive.com.

With OPEC+ meeting later this week, oil prices are looking more buoyed to start the new week after the rebound on Friday.

The breakdown last week threatened to turn the technical picture to be even uglier but dip buyers stepped back in to at least salvage the situation at the weekly close. Now, WTI crude is up to $111.40 – its highest level since 17 June.

There are a couple of headlines that has been stirring the oil market as of late:

• US EIA says no data coming today on US inventories
• Looks like US oil inventory data is going to be delayed again this week
• Ecuador says its oil output may stop completely in 48 hours
• G7 moving closer to a U-turn on the vow to end fossil-fuel financing
• Macron overheard at G7: Saudi Arabia and UAE barely have any spare oil capacity
• UAE tries to spin the report that it’s maxed out of spare capacity

And all of that just adds to the narrative that OPEC+ is almost certainly going to keep the status quo later in the week.

The takeaway from the headlines is arguably that the market remains rather tight and the worst-case scenario, or should I say extremely bullish scenario, is that Saudi Arabia and the UAE are really tapped out. The sense of the word appeals differently to different people in the market but if that’s the only thing that they will offer up, it is the only bit of information that market players can work with.

This article was written by Justin Low at www.forexlive.com.

• Visitors to Macau casinos are expected to rise and Las Vegas Sands (stock ticker: LVS) presents a very interesting reward vs risk opportunity for the long term buyer
• LVS stock seems to be rising from the bottom of a range going back to 2015
• This stock buying opportunity is worth a consideration, especially in light of the possibility that the chinese stock market may have already bottomed for this year
• Other casino related stocks may present an opportunity to buy
• Watch the following technical analysis video for LVS stock

Remember: “You’ll always miss 100% of the shots you don’t take.” – Wayne Gretzky

So should you take the shot with Las Vegas Sands or other casino stocks, in light of the Chinese COVID easing? That’s up to you, as always, trade at your own risk.

Follow ForexLive.com as we present indices or stocks to consider buying and other interesting technical analysis supported opportunities.

This article was written by ForexLive at www.forexlive.com.

It’s looking like buyers are poised to push towards a retest of last week’s high around 136.70 as the yen slips again in trading this week. The better risk mood and higher Treasury yields are underpinning the pair, with a climb from around 135.30 in Asia trading to 135.95 at the moment.

Nothing has really changed in the big picture outlook for the pair as policy divergence continues to play a fundamental role in driving price action higher since the break of 120.00 in March. The fact that the BOJ is still refusing to throw in the towel on easy policy will just continue to keep the pressure on the yen in general.

And higher bond yields will not help with that as they continue to throw the kitchen sink at trying to defend their yield curve control policy.

One threat to a further jump in USD/JPY is that if the bond market doesn’t play ball and that would require a repricing of the Fed’s policy outlook. While the terminal rate pricing has come down, policymakers aren’t shying away from rate hikes yet and that should be enough to also keep the selling pressure on bonds.

The other big threat will be risk of intervention by Japanese authorities but again, that isn’t likely until we get to 140.00 or perhaps even higher, with the velocity of the climb likely to be the more important factor instead.

Looking at other yen pairs, it is still very much sunny skies for CHF/JPY as it breaches 142.00 today.

This article was written by Justin Low at www.forexlive.com.

Yeah, that’s pretty much all they can do at this point with the communique set to add that: „We invite all like-minded countries to consider joining us in our actions“.

I’m guessing that will not include India or China then.

This article was written by Justin Low at www.forexlive.com.

• ECB should avoid hard triggers based on spreads for anti-fragmentation tool
• Comfortable with a 50 bps rate hike in September
• 200 bps worth of rate hikes are needed „relatively fast“
• Inflation is at risk of moving to a higher regime

In case you missed it, the ECB is pretty much likely to go with a „QE but not QE“ option though there will be controversy surely when it is all about backstopping Italy at the expense of others.

This article was written by Justin Low at www.forexlive.com.

Headlines:

• Calmer risk tones prevail to start the new week so far
• ECB changes publication time of monetary policy decisions and press conferences
• Central bank speakers in focus this week
• Heads up: OPEC+ meeting later this week
• G7 still working on precise mechanism to implement price cap on Russian oil – US official
• PBOC says monetary policy will remain accommodative to support economic recovery

Markets:

• EUR leads, AUD lags on the day
• European equities higher; S&P 500 futures up 0.4%
• US 10-year yields up 5.5 bps to 3.179%
• Gold up 0.5% to $1,834.32
• WTI crude up 0.4% to $108.00
• Bitcoin up 0.5% to $21,308

It was a quiet session for the most part as we kick start the new week. Markets are settling in with risk tones mostly calmer and leaning slightly more positive. Equities are holding higher alongside bond yields, though there wasn’t much significant action in FX.

The yen was a notable mover though as it climbed down to 134.70 in Asia trading before rising back to 135.45 currently amid the better risk tones. The dollar is trading more mixed with EUR/USD holding just a touch higher at 1.0565, up 0.1% on the day, while GBP/USD initially swung higher from 1.2270 to 1.2330 only to fall to 1.2255 during the session.

The aussie and kiwi are the laggards despite the better risk sentiment with AUD/USD down 0.4% to 0.6920 and NZD/USD down 0.3% to 0.6295, at the lows for the day currently.

As much as there is better risk appetite, it is still tough to bet against the dollar in the big picture as long as the Fed continues to talk up a big game in hiking rates. But at least with money markets seeing the potential for lower terminal rates, stocks are able to find some added relief for the time being.

This article was written by Justin Low at www.forexlive.com.

ForexLive.com brings you technical analysis videos to make sense of where the Russell 2000 seems to be going, and presents possible trade ideas, including entry price, take profit targets and stop losses, for you to consider. Visit this page as more technical analyses are being published!

Trade the Russell 2000 at your own risk.

This article was written by ForexLive at www.forexlive.com.

• Inflation outlook is stable in China
• Real interest rates are pretty low considering inflation

Some token remarks as the Chinese central bank is reaffirming that they will continue to do their job to align with the government’s policies on COVID-19 and the economy in general.

This article was written by Justin Low at www.forexlive.com.

OPEC+ last met earlier this month on 2 June, where they decided to increase output by 648k bpd in July, up from the initial plan of 432k bpd. They are expected to carry that policy stance into August later this week when they meet on 30 June. That is despite the fact that US president Biden will be heading to Riyadh next month – where he is supposedly going to discuss on ‚energy security‘.

Just be wary that the current oil output deal is set to expire in September and even now, they are already struggling to lift output further amid the lack of spare capacity. That is something to take note of when weighing up the tightness in the oil market in general.

This article was written by Justin Low at www.forexlive.com.