Crypto Weekly: A week in crypto feels like months Crypto Weekly: A week in crypto feels like months Crypto Weekly: A week in crypto feels like months

Crypto Weekly: A week in crypto feels like months

Summary:  The crypto market had an extremely turbulent week, as the third largest stablecoin was wiped out in a matter of days. Now, the reserve of the largest stablecoin Tether is in the spotlight. Norway does not ban the proof-of-work consensus mechanism used in Bitcoin and Ethereum. Regarding Ethereum, its transition away from proof-of-work is one step closer.

Terra is history, USDT shrinks, and USDC thrives

On Monday last week, we wrote that the largest decentralized stablecoin TerraUSD (UST) slightly unpegged from the dollar over the weekend. Fast forward one week, TerraUSD and its native token Terra (LUNA) are now put to sleep. On Monday afternoon, TerraUSD started to unpeg significantly from the dollar, leading to a true death spiral of Terra, further unpegging TerraUSD. TerraUSD presently trades at $0.078, far from its intended price of $1. Prior to these events, TerraUSD had a supply of around 18bn, whereas it is now around 11bn. To redeem some of this supply, its native token Terra went through hyperinflation. From trading at around $82, Terra now trades at $0.00019. As this event unfolded, we wrote an article explaining the death spiral of Terra. Let us face it, Terra is for sure put to sleep, but the consequences are greater than just the Terra ecosystem.

First and foremost, the collapse of Terra attracts the attention of regulators around the globe. The crypto market has over the past 2 years grown substantially, arguably to a size, where it today might pose a systematic risk to other asset classes. Regulators cannot simply sit on their hands to let this risk unfold in front of their eyes, so at some point, they must react to restrain the potential risk of crypto. So, if regulators did not have enough rationale to heavily regulate the industry a week ago, they surely have now. If the governments see fit, they have the required latitude to bury the industry in a coffin through regulation. However, it is important to point out that regulation can likewise be beneficial for stablecoins. As reported by The Telegraph last week, the UK plans to legalize payments with stablecoins to support innovation, ultimately benefitting the whole crypto market.

Knowing the common pace of regulators, the risk of harsh regulation is by default not a short-term risk. What is short-term, though, is the risk of other stablecoins, namely the largest stablecoin Tether (USDT). For years, Tether has not been truly transparent about its reserve backing its $75bn stablecoin. Immediately upon the Terra collapse, the crypto market once again started worrying about Tether’s reserve, which led to a sell-off of Tether, depegging it from $1 to as low as $0.95. It appears market makers and proprietary traders fairly quickly restored Tether at around $1 by buying Tether at a discount and redeeming them directly at Tether for one dollar apiece. Speaking of redeeming, Tether has since the end of last week redeemed Tether worth around $8bn, allegedly with no issues for the time being. As the saying goes, every cloud has a silver lining, since some of the USDT supply has flowed into the second largest stablecoin USDC, whose supply has increased by $2.5bn in the past 7 days. The issuer of USDC, Circle, is known for having a high degree of transparency with respect to its reserve.

Heading into the new week, our focus is firmly pointed towards Tether. Even though Tether has allegedly fulfilled every request of redemption so far, if a single story breaks that Tether cannot fulfill a redemption, fear not seen since March 2020 will spread in the crypto market. Well, if last week felt like months’ worth of fear in a single market, if Tether is insolvent, we are talking years’ worth of fear, simply due to mutual distress that Tether has then artificially pumped the prices of crypto assets for years by issuing not fully backed Tether.

Norway does not prohibit proof-of-work, as Bitcoin’s mining difficulty hits an all-time high

Following in the footsteps of the European Union, the Norwegian Parliament voted no to prohibit proof-of-work on Tuesday. The consensus mechanism used by Bitcoin and Ethereum has for years been criticized for its enormous energy consumption, but for the majority of the Norwegian Parliament, the energy consumption was not enough for them to vote in favor of a ban. Since Norway accounts for roughly 1% of Bitcoin’s mining capacity, a potential ban would not have been a severe hit to Bitcoin, other than the signaling effect of such a ban. Interestingly, the network difficulty of Bitcoin hit an all-time high last week, meaning the network demands more computational power than ever from miners for them to confirm transactions. This is great for Bitcoin’s resistance to attacks, but as a result, the network also consumes more energy.

The first public Ethereum merge test is scheduled for June 8th

Speaking of proof-of-work, the second-largest cryptocurrency Ethereum is one step closer to abandoning proof-of-work to adopt proof-of-stake. On Friday, Ethereum core developers announced that the first public test of the merge is scheduled for June 8th. The merge is the name of the transition from proof-of-work to proof-of-stake. For the past months, there have been a total of five tests, but this is the first public test of an existing network called Ropsten, marking that we are one step closer to the merge. Following Ropsten, it is planned to merge two other test networks prior to the merge. If everything turns out well with Ropsten and the following two test networks, it is realistic to assume that the merge takes place in August. The merge will reduce Ethereum’s energy consumption by over 99.95%, reduce its inflation from 5.4mn to 0.5mn Ether yearly, and distribute staking rewards of up to 10% annually to stakers of Ethereum.

Bitcoin/USD - Source: Saxo Group
Ethereum/USD - Source: Saxo Group
UST/USD – Source: TradingView
LUNA/USD – Source: TradingView
USDT/USD – Source: TradingView


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992