Bitcoin, the world’s largest cryptocurrency by market capitalization, fell 3.92% in the week from Feb. 3 to Feb. 10, trading at US$21,848 at 6 p.m. on Friday in Hong Kong. Ether lost 5.32% in the same period, to change hands at US$1,547.
Colin Johnson, chief executive officer and co-founder of Freeport, a platform bringing fine art investment on-chain, said he sees two price points critical for the market’s direction.
“Key price levels to watch are a $19k floor and $25k ceiling. If you see a breakout to either side, it’s likely due to significant macro news – as the driest powder is currently in the hands of highly risk-sensitive parties,” he said in a LinkedIn response to questions.
Jonas Betz, a crypto analyst based in Germany, agreed with the US$25,000 key price ceiling that could help the world’s biggest cryptocurrency return to levels seen before the series of failures and bankruptcies that befell the industry last year.
“If Bitcoin is able to reclaim and hold this price level on the weekly chart the next resistance level is around US$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 10 largest non-stablecoin cryptocurrencies, up 8.34% on the weekly chart, trading at US$1.28.
The global crypto market cap stood at US$1.02 trillion on Friday at 6 p.m. in Hong Kong, down 5.55% from US$1.08 trillion a week ago, according to CoinMarketCap data. Bitcoin’s US$421 billion represented 41.4% of the market, while Ether accounted for 18.6%.
Freeport’s Johnson said macroeconomic factors will continue to drive sentiment, helped by signs of inflation easing and a smaller increase in interest rates by the U.S. Federal Reserve in February. However, he said “that trend is not guaranteed,” pointing to spoilers such as rising U.S.-China tensions following the spy balloon incident and developments in the Ukraine conflict.
Kasper Vandeloock, chief executive officer of quantitative trading firm Musca Capital, said the appetite for crypto investment is still strong, adding that some investors were surprised on the upside when more skeletons did not emerge after the FTX/Celcius/3AC shenanigans.
“There is an appetite for crypto, venture capitalists want in and there is a lot of demand. Shorts are being covered, FOMO (fear of missing out) is being created,” wrote Vandeloock, in an email to Forkast.
However, Betz warned that traditional financial markets are still driven by a fear of a global recession and higher inflation: “If this comes true, further de-risking will take place and markets will plummet.”
The fear of U.S. entities excluding exchanges and other actors in the crypto industry from the banking system is currently driving uncertainty. Binance has already announced it will suspend USD bank transfers starting Feb. 8, wrote Betz.
Market concern also grew after crypto exchange Kraken announced Thursday that it will shut down its on-chain staking services to settle charges from the Securities and Exchange Commission (SEC), which had alleged that two of the exchange’s subsidiaries failed to register the offer and sale of their staking program. Kraken also agreed to pay US$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 efficient or fair way of regulating.”
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 enabling the creation and monetization of AI services.
AGIX rallied over 119% to change hands at US$0.434. The token started its pick-up on Jan. 23, soon after Microsoft confirmed its US$10 billion investment in OpenAI.
The gains reignited 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 GRT was the second biggest gainer, up over 60% to trade at US$0.16. The Graph is an indexing protocol to publish open APIs with data. The Graph’s technology promotes AI capabilities, as its databases show the 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 websites like ChatGPT. The importance of AI has always been there, we use machine learning and AI daily but it’s not something we are aware of. Now that we can interact with it and see how powerful AI can be, people want a piece of the pie and will buy anything as long as it is AI related,“ wrote Vandeloock.
Johnson attributed the rally to the value of blockchain and AI. “People see two incredibly powerful technological advancements and believe that combining them must create a god-like technology. In a future where AI is able to replace human output and capture a huge amount of value, we will need blockchain to allow for the proper distribution of that massive output,” wrote Johnson.
“AI will also help increase the speed at which cryptocurrency infrastructure is built, and the companies that are able to capture the value output from that will see obscene revenue growth over the next five years,” he added.
But Betz held a different view. “The AGIX rally is fueled by the current hype surrounding 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 technology are far from compatible with each other, given the current state of the art,” wrote Betz.
“The most likely outcome for the crypto market next week will be a continued crab walk through the doldrums,” wrote Johnson. “Some up days and some down days, and the potential for a breakout on either side based upon China’s economy re-opening, any inclination of the Ukraine war resolving, or inflation data,”
Betz also anticipates a crab walk sideways. “I expect the next week will show a sideways [market] with a slight downtrend. Investors should be mindful of a possible U.S. crypto de-banking operation led by the Fed and Office of the Comptroller of the Currency (OCC), which according to speculations have prepared measures that are deemed draconian and are aimed to kill crypto,” wrote Betz.
Johnson said that while major cryptos like Ethereum are “by default in growth mode,” macroeconomic challenges are weighing down potential.
“We can expect the technology and associated brainpower to continue driving demand via novel use cases. Fighting that growth is real, daunting macro challenges – inflation, international trade disputes, pandemics shutting down countries, wars, and other persistent risk factors,” wrote Johnson.
Vandeloock anticipates bearish momentum for some altcoins. “After this run, I still am expecting a price drop to happen on major altcoins.”
“A lot of players are getting in at a late time and players are getting greedier. I’m expecting AI projects to still do amazing, however many are already at a high market cap such as $FET. I would look at new projects that started building a crypto-AI business before the AI craze started,” wrote Vandeloock.