Cryptocurrency's decoupling with Nasdaq accelerates after Luna scandal

The once-red hot price of Luna token is displayed at a customer service center of Bithumb in Seoul, May 27. Yonhap

By Lee Min-hyung

Cryptocurrency's decoupling with the Nasdaq is accelerating in the wake of the recent collapse of Terra's Luna token.

Before the abrupt crash of the once-popular Terra ecosystem, overall cryptocurrency prices moved in tandem with the Nasdaq. According to data from CoinMarketCap, Bitcoin's price fell by around 2.4 percent at 8 a.m., May 28. This was in contrast to an overnight rebound of major Wall Street indexes. The S&P 500 closed with a gain of 2.47 percent on Friday, with the Nasdaq extending a gain of 3.33 percent during the same period.

The decoupling between Bitcoin and U.S. stock indexes was not evident before the Luna collapse. Crypto investors have so far been paying close attention to the ups and downs of the Nasdaq this year when investing in Bitcoin and other altcoins, as their price movement coupled with each other amid growing woes over risky assets after the U.S. started its monetary tightening policy.

The recent decoupling was largely attributable to the worsening investor sentiment in the crypto market after the unexpected collapse of Terra and Luna in early May.

Even if cryptocurrencies and U.S. stocks are generally categorized as risky assets in this period of global monetary tightening, the former has continued its losing streak in recent weeks, with investors' fear sentiment reaching its peak, unlike U.S. stocks which bounced back last week on a technical rally.

Industry officials said the decoupling would remain in place for the time being in the aftermath of the Luna debacle, which led to trillions of won in losses.

"The Nasdaq's movement was a key indicator when crypto investors purchase or sell their assets, as both of them showed a similar pattern in general up until recently," an industry analyst said. "But this appears not to be the case for now, when a growing number of investors identify crypto assets as more riskier than U.S. stocks."

It remains unclear whether the crypto market will be able to achieve a major rebound in the foreseeable future, as the U.S. and major economies around the world are on track to increase their benchmark rates. The Federal Reserve and the Bank of Korea have already increased their key rates and hint at doing so a couple more times before the end of this year.

On top of that, investors' initial response to the Terra Luna 2.0 remains skeptical, with the rebranded Luna price showing extreme volatility after it made its renewed debut last weekend.

Data from CoinMarketCap showed that the new Luna price topped $10 at one time on May 31, but fell to around $6 as of Thursday afternoon. With global financial authorities stepping up monitoring of the crypto market, fewer investors are also willing to go on a buying spree of major cryptocurrencies.

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