Decentral Block Post

Crypto-spouting Twitter bots could be playing a much larger role in artificially inflating the price of altcoins than previously understood, a new study has suggested.

Using a sample of various FTX-listed cryptocurrencies in a study published Aug. 2, the Network Contagion Research Institute (NCRI) said it analyzed over 3 million tweets posted between Jan. 1, 2019, to Jan. 27, 2023, surrounding 18 altcoins.

The study found that Twitter bot activity played a crucial role in amplifying the value of these cryptocurrencies, including The Sandbox (SAND), Gala (GALA), Gods Unchained (GODS) and LooksRare (LOOKS), with half of the coins showing signs of price influence as a result of tweet bot activity.

It also found that these inauthentic tweets would increase after FTX posted about the token on social media, which it said raises questions about whether FTX or Alameda Research could have played a role in coordinating the bot activity.

"In fact, for half of the FTX listed coins in the sample, inauthentic tweet volume showed signs of forecasting subsequent price. This suggests that inauthentic networks successfully and deliberately deployed to influence changes in FTX coin prices," it said, adding: 

AAVE, the governance token of the decentralized finance (DeFi) protocol Aave, experienced a 17% decline between July 30 and August 1, reaching the $62 level. 

While the $62 support has demonstrated its resilience, the current price of $64.40 is still 12% below the daily close on July 30. Investors are now questioning whether this movement signifies a more cautious approach to the sector or if other factors are exerting pressure on the AAVE token price.

Part of the recent movement in the AAVE token can be attributed to the risks of cascading liquidations on DeFi protocols, resulting from the Curve Finance pool exploit that commenced on July 30. However, Aave's decentralized liquidity protocol has successfully survived previous identical scenarios and the protocol has a substantial $295.6 million deposited in its Safety Module.

Notably, Michael Egorov, the founder of Curve, currently holds a substantial $76.6 million loan backed by 357.3 million CRV tokens across three DeFi applications, as reported by Delphi Digital. This represents 40.5% of the entire CRV circulating supply and poses risks to the ecosystem, raising concerns about potential liquidation repercussions on major protocols, including Aave.

According to Delphi Digital data, specifically on Aave, Egorov holds 267 million CRV tokens, backing a 54.2 million Tether (USDT) loan. With a 55% liquidation threshold, the current liquidation price for the CRV token stands at $0.37, which appears relatively secure at the moment. However, it's essential to note that Egorov is paying a significant 50% APY for this loan.

Ratings agency Fitch downgraded the United States’ long-term credit rating from AAA to AA+ on Aug. 1 and this move dented the risk on sentiment. The U.S. equities markets witnessed profit-booking on Aug. 2 and the cryptocurrency market’s recovery stalled in its tracks.

However, after the knee-jerk reaction, the markets may settle down. The cryptocurrency markets are likely to keep their focus on the news and events surrounding the Bitcoin (BTC) spot exchange-traded fund (ETF) applications. Bloomberg ETF analysts Eric Balchunas and James Seyffart said in a statement that the possibility of an ETF application getting greenlighted has surged from 1% a couple of months ago to 65%.

The recent developments in the crypto sector have rejuvenated the Bitcoin bulls. Software development firm MicroStrategy founded by Michael Saylor is planning to raise up to $750 million via a stock sale, with the aim to use the funds for working capital and to buy more Bitcoin. The firm already holds 152,800 Bitcoin worth about $4.5 billion at current prices.

Will buyers defend the immediate support levels in Bitcoin and altcoins or could the bears overpower the bulls? Let’s study the charts of the top-10 cryptocurrencies to find out.

Bitcoin price analysis

Bitcoin’s volatility picked up on Aug. 1. The bears pulled the price below the immediate support at $28,861 but the long tail on the candlestick shows aggressive buying at lower levels.