Total Crypto Market Cap
Last week, the cryptocurrency market was anything but tranquil as a surge of positive vibes swept through. The latest short squeeze proved to be a game-changer, propelling Bitcoin (BTC) to a staggering 8% gain for the week. Now hovering closer to $25,000, the world's largest cryptocurrency is basking in the glory of a level it hasn't graced in 8 months.
Before this epic rally, Bitcoin had been spending most of its time struggling to reach the $22,000 level following a major dip on February 9. This unfortunate drop came hot on the heels of Kraken's announcement to halt staking services for US-based customers, as part of efforts to appease the US Securities and Exchange Commission's (SEC) crackdown on the company.
The stringent regulatory position towards cryptocurrencies by regulators resulted in a tepid response from the broader market, thereby inhibiting any potential rally for Bitcoin in the following days.
Furthermore, concerns were raised about the Federal Reserve's possibility of resuming aggressive rate hikes following the release of the CPI and Core CPI numbers, which showed little improvement in inflation. Consequently, BTC experienced a sharp decline of 1.5%, plummeting to $21,677 on the CPI announcement, before quickly rebounding to $22,259.
Despite news of regulatory action against Paxos, the market leader, Bitcoin, stabilized above the $22,000 price level after the CPI announcement, providing a solid foundation for its bullish surge to $24,800.
The upcoming macro calendar is anticipated to remain largely quiet until the Fed meeting in March, signaling a trading environment that is mostly flat for the crypto markets. Bulls are advised to exercise caution without any substantial consolidation around these levels.
The critical question remains whether this rally is the onset of another bull run or not. In brief, should we lose $20,000 again, the market may take some time before an eventual recovery. However, if Bitcoin (BTC) successfully concludes Q1 above $20,000, we may witness the commencement of a broader rally this year.
Discussion on Stablecoins
Another significant incident from last week, a lawsuit against Binance USD (BUSD) stable coin issuer Paxos, also resulted from the U.S. governmental crackdown on cryptocurrencies. This is similar to the announcement that Kraken was closing its U.S. staking activities.
This past weekend, the SEC announced plans to sue Paxos Trust Company for the issuance of BUSD in a Wells Notice to the blockchain infrastructure platform. Since 2019, Paxos reserves have served as the basis for Binance USD's issuance and backing.
On February 13, Paxos declared that it was ending its partnership with Binance for the white-labeled, dollar-pegged stablecoin. On on February 21, Paxos will stop issuing new BUSD stablecoins due to the ongoing regulatory investigation.
Throughout the coming year, the BUSD issuer will keep redeeming the stablecoins with the BUSD backing reserves, which include short-term treasuries and cash-like assets. Redeeming for cash (US dollars) or Paxos' own stablecoin, USDP, will be made easier by Paxos.
The reason for the accusations appears to be that Paxos has been given permission to issue Binance USD stablecoins on the Ethereum blockchain, but not on any other network. BUSD, one of the most widely used stablecoins, is accessible on a variety of networks, namely the BNB Chain (BNB).
Recent updates state that Paxos "categorically disagrees" with the SEC's allegations and is "prepared to vigorously defend if necessary." They also state that the notice has no effect on any other aspect of their business and that BUSD remains unaffected since it is "always backed."
The chief strategy officer of the company reportedly stated that Binance anticipates paying fines to resolve ongoing regulatory and law enforcement investigations into its operations in the United States.
The market capitalization of BUSD began to fall in mid-November after reaching its highest-ever level of $23 billion. As long as it maintains the $1 peg, a stablecoin's market capitalization, which measures supply, had a significant decline in December 2022. Justice Department was considering prosecuting its executives for financial crimes.
Recent market cap declines for BUSD have brought it to its lowest level since early May 2022, only days before Terra Classic (USTC), a stablecoin, lost its peg and crashed. Binance became the third-largest stablecoin on the market when USTC began to collapse.
It now seems like history is repeating itself. Due to a significant outflow of traders, Binance USD has been deviating very little from the peg. Many of these traders are choosing USDT and USDC stablecoins instead, and others are likely switching to BTC, which has helped the latter rise over the past few days.
Data show that since the start of the week, Tether, the biggest stablecoin on the market, has added approximately $1.1 billion USDT tokens, significantly boosting its market dominance.
Investors are considering the possibility that USDC could be subject to SEC regulation, similar to BUSD, which is causing the token's market capitalization to continue to fall.
The stablecoin issuer was unable to profit from Wall Street's problems due to reports that Circle was the SEC's next target, notably the unsubstantiated accusations that Circle had received a Wells notice from the agency.
Meanwhile, Binance had seen large daily withdrawals over the last days, as investors cut their holdings on the platform, similar to the ones seen after Terra collapse, the crash of 3AC and FTX catastrophe.
Rising trading volumes on the stablecoin-focused DEX Curve indicate that some traders may be switching to decentralized exchanges instead (CRV).
Long term, reduced liquidity and leverage will result from the capped production of one of the most popular stablecoins, particularly on Binance, where the exchange has been actively promoting its token among users since it switched USDC trading pairs to BUSD.
A Crypto Winter—Is That Even Possible?
Following its debut on Upbit, the biggest Korean exchange, the Polkadot parachain Astar Network (ASTR) token experienced a sharp weekly price surge of 40% in the midst of a largely flat market.
Toyota has agreed to sponsor Astar Network, which offers the framework for creating dApps with EVM and WASM smart contracts. This sponsorship was announced earlier this month.
As Toyota explores more use cases for blockchain technology, developers were tasked with creating an intracompany decentralized autonomous organization (DAO) support service for Toyota employees on the Astar Network.
The Conflux Network's native token has seen the strongest gains since the crypto project announced a deal with China Telecom, the second-largest telecom provider in the nation, to create blockchain-enabled SIM cards. The weekly chart of the CFX token increased by 120% as traders become more aware of it.
The memecoin FLOKI, which replaced the more popular Dogecoin (DOGE) and Shiba Inu (SHIB), increased by 77% the next week after Elon Musk shared a meme with his dog Floki acting as the new Twitter CEO.
Shiba Inu dog-themed tokens, including DOGE and SHIB, spiked on Musk's post. This is not the first time that Musk's tweets have caused this particular group of tokens to soar, as the billionaire and current CEO of Twitter has a history of supporting DOGE since 2021. Usually, the upward price movement is followed by a forthcoming selloff in the doge-related market.
The largest liquid staking system Lido (LDO), which is a peer of Rocket Pool, was riding the action against Kraken, which led to a 14% weekly gain for the platform's governance token LDO.
Aside from the LSD narrative resurgence, LDO may have made money through the LidoDAO vote that approved giving the DAO's contributors governance tokens over the course of up to four years.
There hasn't been a vote yet on treasury management, another contentious topic among LDO token owners. The DAO's financial division made recommendations for a full or partial sale of the 20,300 ether tokens that might be used to prolong the project's runway in a proposal that was presented on February 14.
LDO experienced a stratospheric spike earlier this year as Ethereum neared the start of staked ETH withdrawals with the Shanghai upgrade, with the token up nearly two times year to date.
The governance token for the second-largest LSD platform, Rocket Pool (RPL), went up 18% on the momentum last week as liquid staking providers gained power as a result of the SEC's action against Kraken. The token's YTD returns are at 140%.
In contrast to staking programs run by controlled exchanges, liquid staking protocols present themselves as more open and decentralized alternatives. Yet, it is not that easy to determine whether decentralized staking methods are ready to entirely take over the market.
Kraken's staking mechanism was distinct, therefore the SEC's pursuit of Kraken does not necessarily portend that it will soon take legal action against Coinbase or another staking provider. Market opinion is that centralized staking platforms will remain popular as long as they don't provide a yield product, based on the most recent SEC enforcement action.
Incidentally, the two major decentralized staking providers haven't witnessed a spike in TVL since the Kraken staking program ended.
AI And Metaverse Tokens Are Falling, And USDN Is Following UST's Demise
The biggest winners last week are the biggest losers this week—this is a common narrative in the cryptocurrency world. The excitement around artificial intelligence (AI) has suddenly subsided, leaving tokens related to the field incurring losses.
Given past trends, this fantastic surge is likely to be fleeting until the speculative mania goes down, as we stated in last week's Coin360 weekly. But, it's still possible that these tokens are just taking a break before resuming their ascent.
In response to a slowdown in social metrics, Alethea ALI (ALI, -15%), SingularityNET (AGIX, -5%), Fetch.ai (FET, -2%) and some other crypto-marries-AI tokens experienced a decline. For those that bought into the hoopla, the most recent dip meant losses.
Nonetheless, individuals who bought these tokens at the beginning of the year still stand to make a sizable profit: ALI was up by 750% YTD, while AGIX and FET surged by 890% and 415% on the same timeframe, respectively.
Tokens tied to the metaverse, another segment of the cryptocurrency market, also had a losing week this week. After seeing a strong increase earlier in the year, the values of the tokens for The Sandbox (SAND), Decentraland (MANA), and Gala Games (GALA) all declined.
The price increase for GALA in January seems to be driven by fundamentals as Gala Games announced the launch of its Gala Film platform, which uses GALA as gas, and announced the acquisition of two game studios.
Built on the Waves blockchain and backed by WAVES tokens, the algorithmic stablecoin USDN had a 24% weekly decline to trade at about $0.23 as opposed to the $1 it should be tied to.
Even before Terra's UST Classic (USTC), which used a similar technique, crashed, the "stablecoin" initially lost its peg to the dollar in April 2022.
When Waves founder Sasha Ivanov disclosed in December 2022 that his team would be abandoning USDN in favor of establishing a new stablecoin, the price of USDN fell even further.
Sources now claim that the Waves team dumped USDN stablecoins while the Waves ecosystem's lending mechanism was experiencing severe liquidity problems. The USDN days are numbered, as we have stated, but some users' funds seem to be trapped on the network with no way out.
Blur Trying To Overtake OpenSea's Dominance
The number of NFTs used to enter Yuga Labs' Dookey Dash game decreased noticeably on the Coin360 top NFTs map when the game concluded last Wednesday. Checks led the pack in terms of sales volume this week as NFT investors transacted over $11.5 million in the group.
But, there was no collection involved in the biggest story this week in the NFT sector. Blur, a rival of OpenSea, started an airdrop for its early customers on Tuesday. In the first day following the airdrop, the Blur coin experienced trading activity of more than $500 million.
The enthusiasm subsided in the days after the airdrop, but the token's current 24-hour volume is still at or around $1 billion, and its current market valuation is just shy of $375 million.
During the past few months, Blur has been threatening OpenSea's dominant position among NFT marketplaces. Since its launch in October, Blur has grown to represent 25% of trades and roughly 40% of NFT sales volume, mostly eroding OpenSea's market share.
During the airdrop, "Pacman," the CEO of Blur, called on NFT producers to boycott OpenSea because it had disabled full royalties for people using both platforms. Due to OpenSea's rules, creators have not yet been able to get their full royalties on Blur or OpenSea.
While the daily volume on Blur surged from 35% of the total market volume as of Feb. 12 to 65% on Feb. 16 in the wake of the blockbuster airdrop, according to Dune Analytics data, OpenSea hasn't publicly responded yet—neither with a word or any action.
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