Decentral Block Post

Despite the recent negative crypto and macroeconomic newsflow, the total cryptocurrency market capitalization broke above $1 trillion on Jan. 21. An encouraging sign is that derivatives metrics are not showing increased demand from bearish traders at the moment. 

Bitcoin (BTC) price gained 8% on the week, stabilizing near the $23,100 level at 18:00 UTC on Jan. 27 as the markets weighed the potential impact of Genesis Capital's bankruptcy on Jan. 19.

One area of concern is Genesis Capital's largest debtor is Digital Currency Group (DCG), which happens to be its parent company. Consequently, Grayscale funds management could be at risk, so investors are unsure if the Grayscale Bitcoin Trust (GBTC) assets could face liquidation. The investment vehicle currently holds over $14 billion worth of Bitcoin positions for its holders.

A United States appeals court is set to hear the arguments relating to Grayscale Investment's lawsuit against the Securities and Exchange Commission (SEC) on March 8. The fund manager questioned the SEC's decision to deny their asset-backed exchange-traded fund (ETF) launch.

Regulatory concerns also negatively impacted the markets after South Korean prosecutors requested an arrest warrant for Bithumb exchange owner Kang Jong-Hyun. On Jan. 25, the Financial Investigation 2nd Division of the Seoul Southern District Prosecutor's Office sentenced Kang and two Bithumb executives on charges of conducting fraudulent illegal transactions.

Aptos’ APT reached a new all-time high of $20.39 after posting gains exceeding 400% since the start of 2023. While the rally could just be a pump-and-dump event due to the perception of weak fundamentals, increasing negative sentiment toward the token will likely fuel the prices in the short term.

Let’s explore some of the factors that could be propelling the Aptos price rally.

A rich history and strong investor backing

Aptos is a byproduct of Facebook’s attempt with the Libra blockchain, which regulators forcibly shut down. Two of Libra’s leadership team members, Mo Shaikh and Avery Ching, later found Aptos, a decentralized version of the abandoned blockchain project.

The project is based on the Move programming language and introduces a new class of layer-1 blockchains that will compete against the likes of Solana and Cardano. The primary reasons behind the tailwinds for the APT token include investors’ hope for a technological breakthrough that could finally provide a scalable, secure, decentralized blockchain.

Aptos raised $350 million in 2022, which included a $200 million seed round led by Andreessen Horowitz and a $150 million Series A funding round led by FTX Ventures and Jump Crypto. Later, Binance made a follow-on strategic investment to help boost the Aptos ecosystem.

Bitcoin (BTC) has “well-formed” evidence, which suggests that its next all-time high will top out at $200,000, one analyst says.

In a tweet on Jan. 27, popular Twitter commentator Trader Tardigrade, also known as Alan, also revealed $70,000 as the next potential bear market bottom.

Stochastic indicator offers Bitcoin bulls historical firepower

For many, BTC price action is still bound by Bitcoin’s four-year halving cycles. The resulting price pattern offers one “all time high year” in every four, with 2025 next in line.

Bitcoin’s block subsidy halving will occur a year prior, and from then on, Alan argues, the path will be open to a giant $200,000.

That price tag came about from an analysis of Bitcoin’s stochastic oscillator, which syncs with cycle highs and lows in BTC/USD. Currently, the indicator is printing its latest trough, and if history is a guide, price behavior will do likewise.

Litecoin (LTC) has rebounded by 130% to almost $100 after bottoming out near $40.50 in June 2022. The primary reasons include broadly improving risk-on sentiment and euphoria around Litecoin’s upcoming halving in August 2023.

However, technicals suggest that LTC may wipe out most of these gains in the coming months.

LTC price paints giant bear flag 

Litecoin stands to pare its gains mainly due to a giant bear flag on the weekly chart.

A “bear flag” is a bearish continuation pattern that occurs when the price consolidates inside an ascending, parallel channel after undergoing a strong downtrend. It resolves after the price breaks below its lower trendline with a rise in trading volumes.

Litecoin has been painting a similar pattern since early June 2022. Previously, the LTC/USD pair had undergone a 70% price correction from $130 to $40.50. Thus, from the technical perspective, it would resume its downtrend course if its price breaks below the lower trendline.

Market analysts rely on many technical indicators to anticipate future trends, one of which is the very-popular ascending triangle chart pattern.

What is an ascending triangle pattern?

As the name indicates, an ascending triangle on a chart forms when the price consolidates between a rising trendline support and a horizontal trendline resistance.

The pattern typically appears during persistent uptrends or downtrends. Most technical analysts see it as a “continuation pattern,” meaning the general market trend is likely to resume.

For example, the Bitcoin (BTC) price chart above shows the BTC/USD trading pair forming an ascending triangle pattern between April 2020 and July 2020.

The BTC price breaks out of the triangle range in late July to the upside. It returns to retest the pattern’s resistance trendline as support in September for further bullish confirmation, resuming its uptrend.

Bitcoin (BTC) price had a mixed reaction on Jan. 25 after the United States reported a 2.9% gross domestic product growth in the fourth quarter, slightly better than expected. Still, the sum of all goods and services commercialized between October and December grew less than 3.2% from the previous quarter.

Albeit somewhat optimistic, another data set limiting investors' confidence was news that the U.S. Federal Reserve (FED) would revert its contractive measures anytime soon as U.S. durable goods orders jumped 5.6% in December. The indicator came in much higher than anticipated, so it could potentially mean that interest rates could be increased for a little longer than expected.

Oil prices are also still a focus for investors, with crude WTI approaching its highest level since mid-September, currently trading at $81.50. The underlying reason is the escalation of the Russia-Ukraine conflict after the U.S. and Germany decided on Dec. 25 to send battle tanks to Ukraine.

The United States dollar index (DXY), a measure of the dollar's strength against a basket of top foreign currencies, sustained 102, near its lowest levels in eight months. This signals low confidence in the U.S. Federal Reserve's ability to curb inflation without causing a significant recession.

Regulatory uncertainty could also have been vital in limiting Bitcoin's upside. De Nederlandsche Bank, the Dutch central Bank, fined cryptocurrency exchange Coinbase $3.6 million due to non-compliance with local regulations for financial service providers — the news was released on Jan. 26.

For much of 2022, the crypto market focused on the United States Federal Reserve’s actions. The central bank created a bearish environment for risk-on assets like stocks and cryptocurrencies by increasing the interest rates on borrowing. 

Toward the end of 2022, positive economic data, healthy employment numbers and a decreasing inflation rate provided hope that a much-awaited slowdown in the rate of interest rate hikes would occur. Currently, the market expects that rate hikes will reduce from 50 basis points (bps) to 25 bps before the complete end of the hiking regime by mid-2023.

From the perspective of the Fed’s goal of constraining liquidity and providing headwinds to an overheated economy and stock market, things are starting to improve. It appears that the Fed’s plan of a soft-landing by quantitative tightening to curb inflation without throwing the economy into a deep recession might be working. The recent rally in stock markets and Bitcoin can be attributed to the market's trust in the above narrative.

However, another essential American agency, the U.S. Treasury, poses significant risks to the global economy. While the Fed has been draining liquidity from the markets, the Treasury provided a countermeasure by draining its cash balance and negating some of the Fed's efforts. This situation may be coming to an end.

It invokes risks of constrained liquidity conditions with the possibility of an adverse economic shock. For this reason, analysts warn that the second half of 2023 may see excess volatility.

Stablecoins in the cryptocurrency market help provide U.S. dollar-pegged tokens within the volatile industry. In bull markets, the market capitalization of stablecoins tends to decrease as investors flock to more volatile assets; and in bear markets, investors seek shelter in low-volatility stablecoins, thus increasing their market caps.

On Jan. 26, the total market capitalization for stablecoins like Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and Dai (DAI) is over $131 billion.

Stablecoins are so crucial to the future of crypto that Moody’s, a well-respected analytics agency, is planning to develop a scoring system, which may help reduce the speculation and fear that some investors have with stablecoins.

Such fear amid a lack of stablecoin transparency has led one of the top stablecoins, BUSD, to see a major usage decline in recent weeks.

Let’s examine the factors affecting the BUSD stablecoin.