Bitcoin pulls back below USD 22,000 after January record high. Is the strong start to 2023 about to reverse?
Bitcoin, the world’s largest cryptocurrency by market capitalization, fell 3.92% in the week from February 3 to February 10, trading at $21,848 at 6pm on Friday in Hong Kong. Ether lost 5.32% in the same period, to change hands at USD 1547.
Colin Johnson, CEO and co-founder of Freeport, a platform that brings art investments on-chain, said he sees two price points critical to market direction.
“Key price levels to watch are a floor of $19,000 and a ceiling of $25,000. If you see a breakout to either side, it is likely due to significant macro news – as the driest powder is currently in the hands of very risk-averse parties,” he said in a LinkedIn response to questions.
Jonas Betz, a cryptoanalyst based in Germany, agreed the key price cap of US$25,000 could help the world’s largest cryptocurrency return to levels seen before the string of failures and bankruptcies that hit the industry last year.
“If Bitcoin is able to recover and hold this price level on the weekly chart, the next resistance level is around USD 29,000, which corresponds to the price of Bitcoin before the Terra-Luna collapse.”
Polygon’s Matic was the week’s biggest gainer among the top 10 non-stablecoin cryptocurrencies, up 8.34% on the weekly chart, trading at $1.28.
The global crypto market capitalization was at $1.02 trillion on Friday at 6 p.m. in Hong Kong, down 5.55% from $1.08 trillion a week ago, according to CoinMarketCap data. Bitcoin’s $421 billion represented 41.4% of the market, while Ether accounted for 18.6%.
Freeport’s Johnson said macroeconomic factors would continue to drive sentiment, helped by signs of easing inflation and a smaller increase in interest rates by the US Federal Reserve in February. However, he said “that trend is not guaranteed,” pointing to spoilers such as rising tensions between the US and China after the spy balloon incident and developments in the Ukraine conflict.
Kasper Vandeloock, CEO of quantitative trading firm Musca Capital, said the appetite for crypto investments remains strong, adding that some investors were surprised on the upside when more skeletons did not emerge following the FTX/Celcius/3AC scams.
“There is an appetite for crypto, venture capitalists want in and there is high demand. Shorts are being covered, FOMO (fear of missing out) is being created,” Vandeloock wrote, in an email to Discard.
However, Betz warned that traditional financial markets are still driven by fears of a global recession and higher inflation: “If this comes true, further de-risking will take place and markets will plunge.”
The fear of US entities excluding exchanges and other players in the crypto industry from the banking system is currently driving uncertainty. Binance has already announced that it will suspend USD wire transfers starting February 8, Betz wrote.
Market concern also grew after crypto exchange Kraken announced on Thursday that it will shut down its on-chain staking services to pay charges from the Securities and Exchange Commission (SEC), which had alleged that two of the exchange’s subsidiaries failed to register the offering and sale. of their investment program. Kraken also agreed to pay $30 million.
SEC Commissioner Hester Peirce has publicly criticized the agency’s fines against Kraken, calling the approach “paternalistic and lazy,” adding that “using enforcement actions to tell people what the law is in an emerging industry is not an effective or fair way to regulate on.”
AI coins rally
SingularityNet’s AGIX token was this week’s biggest gainer among the top 100 coins by market capitalization listed on CoinMarketCap. SingularityNet is the world’s first decentralized artificial intelligence (AI) network that enables the creation and monetization of AI services.
AGIX surged over 119% to change hands at $0.434. The token launched on January 23, shortly after Microsoft confirmed its $10 billion investment in OpenAI.
The gains repeated after SingularityNet announced a partnership with Cardano to leverage the blockchain’s programming language, Haskell, for developers using MeTTA, an Artificial Intelligence Domain Specific Language (AI-DSL) focused on autonomous interoperability between AI services.
The Graph’s BRT was the second biggest gainer, up over 60% to trade at $0.16. The Graph is an indexing protocol for publishing open APIs with data. The Graph’s technology advances AI capabilities, as the databases show relationships between data, which cannot be communicated using standard databases.
Vandeloock attributes this to the success of ChatGPT, which has created demand for AI among venture capitalists.
“People are realizing how important AI is now that they can finally interact with it through sites like ChatGPT. The importance of AI has always been there, we use machine learning and AI daily, but it’s not something we’re aware of. Now that we can interact with that and seeing how powerful AI can be, people want a piece of the pie and will buy anything as long as it’s related to AI,” Vandeloock wrote.
Johnson attributed the rally to the value of blockchain and AI. “People see two incredibly powerful technological advances and think that combining them must create a god-like technology. In a future where AI is able to replace human production and capture a huge amount of value, we will need blockchain to allow for proper distribution of the massive production,” Johnson wrote.
“AI will also help accelerate the speed at which cryptocurrency infrastructure is built, and the companies that are able to capture the value generation from it will see obscene revenue growth over the next five years,” he added.
See related article: JPMorgan report shows interest from institutional traders shifting to AI from blockchain after crypto decline
But Betz had a different view. “The AGIX rally is driven by the current hype around AI, as programs like ChatGPT gained mainstream media attention. However, I expect this to be a short-lived pump-and-dump, as blockchain and AI technologies are far from compatible with each other, given the current state of the art,” Betz wrote.
Next week?
“The most likely outcome for the crypto market next week will be a continued crab walk through hibernation,” Johnson wrote. “Some up and some down days, and the potential for a breakout on either side based on China’s economy reopening, any propensity for the war in Ukraine to resolve, or inflation data,”
Betz also expects a sideways crab ride. “I expect next week to turn sideways [market] with a slight downward trend. Investors should be aware of a possible US crypto-de-banking operation led by the Fed and the Office of the Comptroller of the Currency (OCC), which, according to speculation, has drawn up measures considered draconian and aimed at killing crypto,” wrote Betz.
Johnson said that while major cryptos like Ethereum are “by default in growth mode,” macroeconomic challenges weigh on their potential.
“We can expect the technology and associated brainpower to continue to drive demand via new use cases. Combating that growth are real, daunting macro challenges—inflation, international trade conflicts, pandemics that shut down countries, wars, and other persistent risk factors,” Johnson wrote.
Vandeloock expects bearish momentum for some altcoins. “After this run, I still expect a price drop on major altcoins.”
“A lot of players are coming in at a late stage, and players are getting greedier. I expect AI projects to still perform fantastically, but many already have a high market cap like $FET. I would look at new projects that started to build a crypto- AI business before the AI craze started,” Vandeloock wrote.
See related article: Blockchain developers have caught a decentralized interest in cloud storage – will it shake up the industry?
