The market grinds sideways as potential breakouts approach

Bitcoin is clinging to critical support

Amidst the broader horizontal market trend, Bitcoin (BTC-USD) maintained its sideways momentum this week. The flagship currency bounced off last week’s lows to hit a high of $19,889.15 and is currently holding above the $19,100 mark.

The latest on-chain data from CryptoQuant highlights that approximately 48,000 BTC have been withdrawn from Coinbase throughout the week. This massive outflow is the largest since June 2022, with exchanges generally considered a bullish sign. Nevertheless, the technical price action suggests that Bitcoin may have further room to fall as it nears a breakout.

According to market analysts, BTC has been range-bound for quite some time and is still unable to find a clear breakout past the critical resistance level of $20,000. With US inflation now at a 40-year high and further interest rate hikes expected, risk appetite has consistently declined. Amidst this macroeconomic backdrop and the US dollar continuing to strengthen, Bitcoin may come under renewed pressure as further interest rate hikes approach.

Altcoins are making a comeback

Many major altcoins have been able to hold on to their positions this week and inch higher, with a few low- and mid-cap altcoins registering double-digit gains. Polygon (MATIC) delivered the best performance among the top ten altcoins by capitalization. Other low- and mid-cap altcoins such as Uniswap (UNI), Quant (QNT), Elrond (EGLD), Maker (MKR), Synthetix (SNX) and Lido DAO (LIDO) also recorded double-digit gains this week.

During the last seven sessions, MATIC rose by approx. 13.8% after new strategic relationships triggered the upward momentum. The ecosystem has achieved massive adoption growth through 2022, and this latest uptick in the token’s valuation comes amid a relationship with Brazilian fintech organization Nubank.

Earlier this week, Nubank revealed that it would launch its digital token “Nucoin” on the Polygon blockchain. In addition, over three million Reddit users decided to create Polygon accounts to acquire Reddit’s Collectible Avatar NFTs, acting as another catalyst behind the recent price increase.

That said, this week’s top winner is Aave (AAVE). The token’s value rose nearly 23.2% during the week as the DeFi protocol prepares to join the first wave of projects to deploy Polygon’s new zkEVM testnet – an Ethereum-equivalent ecosystem focused on cross-compatibility. Another important catalyst behind this week’s rise was the successful completion of the community vote for the Aave version three distribution on Ethereum.

Axie Infinity, ETHPoW and USTC Spiraling Lower

Even as broader market volatility subsided, play-to-earn (P2E) game Axie Infinity saw its own token lose 5.1% of its value this week. The sustained bearish momentum and the recent Ronin Bridge exploit have affected the platform’s daily active users. The latest report from ActivePlayer highlights that average monthly users fell to 701,447 – the lowest since January 2021.

Meanwhile, the newly launched Ethereum Proof-of-Work (ETHPoW) chain – the blockchain created after a hard fork during Ethereum’s transition to Proof-of-Stake (PoS) – faces an uphill battle. The value of the chain’s native ETHW token has fallen by roughly 10% over the past seven sessions despite Binance launching a new mining pool for ETHPoW miners.

After an impressive rally last week, the value of TerraClassicUSD (USTC) has fallen almost 25.5% this week. This comes on the heels of mounting legal pressure on Terra founder Do Kwon, who is reportedly on the run. According to sources, a group of nearly 4,400 Terra investors have formed the UST Restitution Group to track down Kwon, who is currently wanted in South Korea for financial fraud.

Interpol’s Crypto Taskforce, new tax returns and more

As countries step up efforts to crack down on alleged crypto-crime, the International Criminal Police Organization (Interpol) is introducing a dedicated crypto division to tackle this growing area of ​​interest. According to the latest development, Interpol has already set up a special task force in Singapore to help governments fight digital asset crimes.

Aiming at the confusion surrounding crypto taxation, the United States Internal Revenue Service (IRS) has introduced a new draft filing that includes a broader and more well-defined category covering digital assets and NFTs for 2022 IRS tax forms. The move is an attempt to overcome the complexities associated with filing taxes and declaring crypto assets to the authorities.

In regulatory developments, South Africa’s Financial Sector Conduct Authority (FSCA) added a definition of cryptoassets to the country’s 2002 Financial Advisory and Financial Intermediary Services Act (FAIS). The decision is the first of its kind to regulate crypto-assets in South Africa, bringing the sector under government oversight for the first time.

Last but not least, Japan’s Virtual and Crypto Assets Exchange Association, which regulates crypto assets in the country, has revealed plans to ease crypto laws to attract more crypto entrepreneurs. By March 2024, the regulator wants to implement a flexible screening process and eliminate the lengthy pre-screening process.

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