Market Analysis

Are Cosmos’ ecosystem growth and roadmap enough to sustain ATOM’s current 50% monthly rally?

ATOM gained 50% in January, and while the broader crypto market could remain bullish for some time, does the Cosmos ecosystem have strong enough fundamentals to support further upside?

In September 2022, Interchain Foundation, the team behind the development of Cosmos, introduced the Cosmos ATOM 2.0 white paper. The document proposed significant changes to Cosmos’s design, including a tokenomics upgrade to fund ecosystem development and reduce Cosmos (ATOM) inflation.

While the white paper launch acted as a bullish catalyst for ATOM’s price, the community vote to pass the proposal eventually failed, primarily because of its enormity. Some community members wanted to take a measured approach to each development feature listed in the white paper, starting with interchain security in Q1 2023.

Interchain security will enhance the value accrual position of ATOM as a modular chain. New blockchains will be able to borrow the security from it and pay Cosmos hub validators.

Despite the rejection of the Cosmos 2.0 white paper, the team continues to work on the upgrades mentioned in it. The other improvements in tokenomics will be introduced as a separate proposal to the Cosmos community.

The first week of February witnessed a technical bullish breakout in ATOM’s price. If buyers continue to accumulate, there’s a solid chance of a short-to-medium trade rally.

Interchain Security to bring more value to ATOM stakers

The interchain security implementation remains the most crucial breakthrough in accruing value to ATOM holders. The feature will allow independent blockchains, called consumer chains in the Cosmos ecosystem, to rent security from the validators of the Cosmos hub. Existing Cosmos SDK-based blockchains can choose to be consumer chains too. This will bring additional staking rewards for ATOM holders.

The Cosmos team concluded its developer’s “Game of Chains” campaign to test consumer chains before rolling out the mainnet version of interchain security. They will implement this feature in Cosmos’s lambda upgrade (v9) sometime in February.

Number of blockchains that are part of IBC. Source: Interchain Foundation

Development of Cosmos ecosystem and IBC expansion

One of the most prominent developments will be the introduction of Circle (USDC) on Cosmos. The stablecoin will enhance the liquidity of Cosmos’s decentralized finance ecosystem.

The Cosmos SDK is used to construct many popular blockchain and cryptocurrency projects, such as Binance DEX, Kava and more recently, dYdX. Until now, ATOM didn’t accrue any value from this implementation. However, this will change with interchain security and other developments with cross-chain implementation.

The Inter Blockchain Communication (IBC), which enables interoperability between Cosmos-based blockchains, showcased impressive growth in 2022. Moving forward, the project’s team will implement the interchain scheduler, providing an open and transparent maximal extractable value (MEV) marketplace for cross-chain transactions. It will look to standardize ATOM as the default gas token for IBC transfers, though the fees can be paid in multiple tokens.

In the future, the IBC will help the Cosmos ecosystem expand to other blockchains, such as Ethereum, Near and Polkadot, improving liquidity and traffic with it. The change in ATOM’s tokenomics with interchain allocator to fund ecosystem growth and eventually reduce inflation will also be implemented in time.

Since the beginning of 2023, ATOM’s price has increased by 61%, partly attributed to the broader rally in the crypto market. Nevertheless, the gains were still more significant than Bitcoin (BTC) and Ether (ETH), which gained 48.10% and 43.20%, respectively.

Coinglass data shows a steep spike in the open interest volume for ATOM futures orders from $65 million to $92 million, setting the token up for increased volatility. The funding rate and long vs. short ratio suggest that the interest was primarily in long orders. An over-leveraged futures market can provide headwinds for buyers as sellers will look to run the stops of long players.

Open interest volume for ATOM. Source: Coinglass

The weekly chart of ATOM/USD broke above the 50-day exponential moving average (EMA) at $14.20. The metric has acted as a pivotal level for trend reversals. If the price closes above the 50-week EMA at the end of February’s first week, technical buyers will look to accumulate ATOM for a swing trade.

If the uptrend continues, the bulls will target the resistance levels at $17.20 and $25.20. On the downside, long-term support lies at $6.50 and $3.10.

ATOM/USD weekly chart. Source: TradingView

The Cosmos community has long anticipated the interchain security feature. Thus, the token has a higher chance of sustaining its breakout, at least until the launch.

The growth and the proportion of yield it brings will either keep the bullish momentum alive before the Interchain Foundation moves to the next update or see a fading momentum until the proposal to improve ATOM emissions is finally passed by the community.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

‘Crypto summer’ likely to start in Q2 2023, Morgan Creek Capital CEO says

Bitcoin’s bull market is likely to start earlier than expected due to anticipation of the BTC halving and favorable macroeconomic conditions, according to Mark Yusko, founder and CEO of Morgan Creek Capital Management.

The next crypto bull market will start sooner than most people think, according to Mark Yusko, founder and CEO of Morgan Creek Capital Management. Yusko thinks the next crypto bull run or, as he calls it, “the crypto summer,” could kick off as soon as the second quarter of this year due to the combination of more dovish central bank policies and the anticipation of the Bitcoin (BTC) halving.

While the United States Federal Reserve is unlikely to cut interest rates anytime soon, according to Yusko, the markets tend to anticipate the Fed’s decisions. That means even a slowing down or a pause in interest rate hikes would be interpreted as the signal of an imminent pivot. That would spark a positive dynamic among all risk assets, including crypto.

“What I do think is very likely is the Fed signaling that: ‘Okay, we’re good.’ But that will be interpreted as ‘we’re going to cut’ and then risk assets will explode again,” Yusko pointed out.

Besides the Fed’s more dovish policies, the anticipation of the Bitcoin halving, which is due to take place in the second quarter of next year, will also drive bullish sentiment in the market.

“The market always anticipates the halving […] Nine months before that is usually when the beginning of summer starts,” Yusko said.

To learn when to expect the next crypto bull run and how best to prepare for it, watch the full interview on our YouTube channel and don’t forget to subscribe!

Bitcoin pumped 43% in January 2023! What to expect in February — Watch The Market Report live

On this week’s episode of The Market Report, Cointelegraph’s resident experts discuss what the second month of 2023 could potentially hold for BTC.

This week on The Market Report, the resident experts at Cointelegraph discuss Bitcoin’s (BTC) impressive January rally and whether there are any indicators that suggest it could continue in February.

We start off this week’s show with the latest news in the markets:

Best January since 2013? 5 things to know in Bitcoin this week

After sealing its highest weekly close in almost six months, BTC/USD remains over 40% up year-to-date, with the monthly close just 48 hours away — can the gains hold? Throughout, concerns have called for an imminent come-down, and even new macro BTC price lows as disbelief swept the market. That grim turnaround has yet to come to fruition, and the coming days could yet turn out to be a crucial period for Bitcoin’s long-term trend. It’s going to be a busy week for the markets as the United States Federal Reserve will decide on its next rate hike this week, with Fed Chairman Jerome Powell giving much-anticipated commentary on the economy and policy. The European Central Bank will make the same decision a day later. Add to that the psychological pressure of the monthly close, and it is easy to see how the coming week could be more volatile in Bitcoin’s recent history. So, buckle up as our experts break down the five key things to know in Bitcoin this week.

Bitcoin premium hits 60% in Nigeria as country limits ATM cash withdrawals

At the time of writing, the price of 1 BTC on the Nigerian crypto exchange NairaEX is 17.2 million nairas, equating to a whopping $37,341. That is a hefty premium over the current market price of Bitcoin, around $22,874 at the time of writing. It comes as the Central Bank of Nigeria has continued to impose limits on ATM cash withdrawals amid an ongoing effort to accelerate its shift to a cashless society. Will this have any impact on the price of Bitcoin, considering more and more people will be flocking to purchase the top digital currency, and how will it impact the rest of the markets?

Elon Musk wants Twitter payments system built with crypto in mind

Twitter chief Elon Musk has reportedly instructed his developers to build the platform’s payments system in such a way that crypto functionality can be added in the future. The payment feature will support fiat currencies to start with but will have the capability to accommodate cryptocurrencies if the opportunity arises. For now, things are still pretty vague as to whether the system will involve blockchain or crypto technology, but people are hopeful considering the Twitter CEO has had a lot of influence in the crypto space.

Our experts cover these and other developing stories, so make sure you tune in to stay up-to-date on the latest in the world of crypto.

Next up is a segment called “Quick Crypto Tips,” which aims to give newcomers to the crypto industry quick and easy tips to get the most out of their experience. This week’s tip: How do you evaluate a crypto project?

Market expert Marcel Pechman then carefully examines the Bitcoin and Ether (ETH) markets. Are the current market conditions bullish or bearish? What is the outlook for the next few months? Pechman is here to break it down.

Lastly, we’ve got insights from Cointelegraph Markets Pro, a platform for crypto traders who want to stay one step ahead of the market. Our analysts use Cointelegraph Markets Pro to identify two altcoins that stood out this week, so make sure to tune in to find out which ones made the cut.

Do you have a question about a coin or topic not covered here? Don’t worry — join the YouTube chat room and write your questions there. The person with the most interesting comment or question will have a chance to win a one-month subscription to Markets Pro worth $100.

The Market Report streams live every Tuesday at 12:00 pm ET (5:00 pm UTC), so be sure to head on over to Cointelegraph’s YouTube page and smash those Like and Subscribe buttons for all our future videos and updates.

Digital asset investment products see highest inflows since July 2022: Report

According to CoinShares, digital asset investment products saw $117 million in inflows last week.

On Jan. 30, European cryptocurrency investment firm CoinShares published its “Digital Asset Fund Flows Report,” which revealed that digital asset investments experienced a surge in inflows last week, reaching $117 million, the highest since July 2022.

CoinShares reported that the sector’s total assets under management rose to $28 billion, a 43% increase from its November 2022 lows. The improvement in investment product volumes was evident, with $1.3 billion traded during the week, a 17% increase compared to the year-to-date average. Meanwhile, weekly volumes in the digital asset market have risen by an average of 11%.

Germany saw the highest inflows last week, accounting for 40% of the total ($46 million), followed by Canada, the United States and Switzerland, which received $30 million, $26 million and $23 million, respectively. Most of the inflows were directed toward Bitcoin (BTC) products, with $116 million, while minor inflows were seen into short-Bitcoin products at $4.4 million, indicating a polarized opinion.

The report also revealed that multi-asset investment products continued to see outflows for the ninth consecutive week, totaling $6.4 million. According to James Butterfill, head of research at CoinShares, this suggests that investors are opting for more selective investments. This trend was evident in altcoins, such as Solana (SOL), Cardano (ADA) and Polygon (MATIC) saw inflows, while Bitcoin Cash (BCH), Stellar (XLM) and Uniswap (UNI) experienced minor outflows.

Investors also showed interest in blockchain equities, with inflows totaling $2.4 million. However, a closer examination reveals that sentiment remains divided across providers.

Overall, the digital asset market saw significant growth last week, with investment products experiencing record inflows and improved volumes. The overall trend suggests that investors are becoming more selective in their investments, with a divided sentiment toward blockchain equities.

Why is crypto pumping? Watch The Market Report live

On this week’s episode of The Market Report, Cointelegraph’s resident experts discuss the reasons behind the latest crypto pump.

This week on The Market Report, the resident experts at Cointelegraph discuss the real reasons behind the recent price pump in the market. Can this lead to a $25,000 Bitcoin (BTC) and beyond, or will some unforeseen event ruin the party? Tune in to find out.

We start off this week’s show with the latest news in the markets:

Stablecoin data points to ‘healthy appetite’ from bulls and possible Bitcoin rally to $25K

Bitcoin rallied 11% between Jan. 20 and Jan. 21, reaching the $23,000 level and shattering bears’ expectations for a pullback to $20,000. Even more notable is that the move brought demand from Asia-based retail investors, according to data from a key stablecoin premium indicator. Another bit of bullish information came on Jan. 20 after United States Federal Reserve Governor Christopher Waller reinforced the market expectation of a 25 basis point interest rate increase in February. Do these and other odds favor a rally toward $24,000 or maybe even $25,000?

SEC commissioner reminds of ‘the point of crypto’ as market aims for recovery

Hester Peirce, a commissioner at the U.S. Securities and Exchange Commission, said that after a terrible year, industry players need to remember what crypto is really about. In a speech at the Digital Assets at Duke conference, Peirce laid down some lessons to be learned from the issues that the crypto industry had to face last year. According to the commissioner, 2022 was a “terrible, horrible, no good, very bad year” for both the crypto space and regulators. However, Peirce believes there are valuable takeaways from the series of problems that arose last year. To find out what she thinks crypto is really about, make sure to tune in to the live show.

Bitcoin price stays near $23K as data shows hodlers not selling BTC

With BTC up 40% in January, a further point of concern focused on the temptation to take profits. In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode nonetheless pointed out that long-term holders remained broadly steadfast in their resolve not to exit the market — even after more than a year of losses. Is this another signal of strength and conviction across the crypto space? Our experts break it down for you.

Our experts cover these and other developing stories, so make sure you tune in to stay up-to-date on the latest in the world of crypto.

Next up is a segment called “Quick Crypto Tips,” which aims to give newcomers to the crypto industry quick and easy tips to get the most out of their experience. This week’s tip: What is cryptocurrency copy trading?

Data suggests Avalanche’s (AVAX) rally was a buy the rumor, sell the news event

AVAX price rallied after announcing news of an Amazon cloud integration, but does the news do anything to improve Avalanche’s fundamentals?

Avalanche (AVAX) came into the spotlight early at the beginning of 2023 by adding its blockchain support to Amazon Web Services (AWS) cloud. However, empirical and on-chain analysis suggests that Avalanche’s price surge is likely due to a broader cryptocurrency market pump which will likely end with the rest of the market.

Is Avalanche’s Amazon news exaggerated?

While integration with the world’s largest blockchain service is a positive step for Avalanche, the hype around its implications might be exaggerated. The evidence lies in a similar move that Avalanche’s team made in December 2022.

Avalanche’s team established a deal with Alibaba’s Cloud toward the end of 2022. The Asia-based cloud service commands a 6% share of the sector globally. Nevertheless, the blockchain’s validator count has remained consistent, implying that not many users of Alibaba Cloud are willing to run an Avalanche node.

Avalanche validator count. Source: Avax.network

AWS earns revenue from users willing to use blockchain nodes, which is probably why it keeps adding support for various blockchains. Amazon has supported an Ethereum node since May 2021. The recent Amazon partnership announcement might mislead some investors.

Avalanche’s ecosystem development

Avalanche’s blockchain usage data is also not encouraging. The gas used on the blockchain subsided steeply after the May 2021 crypto market crash and it hasn’t recovered since. The total value locked in Avalanche’s DeFi ecosystem is near two-year lows of $885 million, ranking sixth in comparative liquidity of other chains.

Gas used on Avalanche C-chain and DeFi Kingdoms subnet. Source: Avax.network

The project has found some success with gaming subnets like DeFi Kingdoms and Swimmer Network. While the growth of subnets enhance Avalanche’s ecosystem, it doesn’t bring direct value to AVAX holders because the security and tokenomics of subnets can be independent of the primary Avalanche blockchain.

Avalanche validators only benefit from the subnets when they rent security from Avalanche validators or use the mainnet in the initial phases to bootstrap their project before moving to independent chains. A few promising gaming projects like Shrapnel and Ascenders are working toward this goal. Nevertheless, it remains to be seen if they will bring enough activity and revenue to Avalanche validators.

AVAX exchange flow data and technical analysis

Avalanche’s recent price rally is primarily driven by a liquidation hunt of short orders in the futures market. Coinglass data shows that the funding rate for Avalanche perpetual swaps remained negative since the FTX implosion in November. The crowded short positions allowed whale buyers to run seller’s stops.

The funding rates recovered to the neutral territory after last week’s price surge. It effectively emptied the fuel which was causing the current bull run.

Avalanche perpetual swap funding rate. Source: Coinglass

“Smart money” wallets identified by Nansen deposited AVAX worth $2.3 million during that period. Additionally, venture funds and market makers, including Jump Capital, Wintermute Trading and Longling added $1.3 million to the net inflow. The total inflow of AVAX to exchanges over the second week of January 2023 was $8.025 million.

As Avalanche’s price gained 40% in the second week of 2023, the exchange flow data recorded considerable inflows, probably as investors moved to sell, raising caution flags for buyers.

AVAX inflow and outflow from crypto exchanges. Source: Nansen

Technically, breakout above the 50-day exponential moving average (EMA) at $13.40 keeps alive the possibility of tagging the 100-day EMA at $20.70 and August 2022 peak of $31.45. However, the time for buyers to show their hands is running out quickly.

The Moving Average Convergence Divergence (MACD) indicator shows early signs of topping out, with buying volumes taking a dive.

AVAX/USD daily price chart. Source: TradingView

In the AVAX/BTC pair, the move encountered resistance from the support and resistance level of 0.000834 BTC, which is also where the 100-day EMA currently lies. If buyers fail to conquer this level, a drop toward 0.000642 BTC is expected, with a chance of reaching 0.000465 BTC.

AVAX/BTC daily price chart. Source: TradingView

Moreover, the broader altcoin market capitalization (excluding Bitcoin) has already tapped its bullish targets around its 100-day MA at $563 million. If the positive momentum starts to cool off across the niche market, AVAX uptrend will likely reverse with it.

Generally, Avalanche’s usage statistics have remained unchanged since the last quarter of 2022. There is little to attribute to the recent price rally to fundamental growth. The project has the potential to grow in the future, benefiting from the blockchain gaming space.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

DeFi problems and opportunities in 2023: Market Talks

Join us as we discuss decentralized finance, how it performed in 2022, and what its potential is in 2023.

On this week’s episode of Market Talks, Cointelegraph welcomes Grant Shears, founder of Blocmates — an educational and consultancy company that aims to create crypto, decentralized finance (DeFi) and Web3 content that anyone can understand.

This week, to kick things off, the show takes a look at the emerging trends of 2023 and what people should look forward to. What industries could really take off this year, and which sector could have the most potential to grow?

It’s no secret that 2022 was not a great year for DeFi, an industry that arguably imploded on itself by offering unsustainable high yields that eventually caused the model to collapse. Host Ray Salmond, Cointelegraph’s head of markets, asks Shears if there are any projects this year that plan to fix this problem, and what that fix might look like.

Traditional finance (TradFi) seems to have caught up to DeFi since yields have increased from about 1% to 3.5% — and in some cases 4.65%. Plus, TradFi comes with a sense of security and safety. There are lower risks involved when compared with DeFi, where in order to get higher yields, users must also take on higher risks. Salmond asks Shears to shed some light on how DeFi can make a case for itself in this environment.

Ever heard of “NFT-Fi?” No? You’re not alone. Although it’s been around since 2020, not much has been discussed about it or its potential. On this episode, Salmond and Shears discuss what it is and what problems it aims to solve.

Next up is some good ol’ technical analysis. The show looks at Bitcoin (BTC), Ether (ETH) and a few altcoins to see what fundamentals Shears is currently tracking and how he’s trading this current market. Salmond and Shears also discuss Bitcoin’s recent price rally and whether it was a shift in trend or just another bull trap.

People are getting excited about the new staked ETH unlocks coming with the Shanghai upgrade. Salmond gets Shears’ views on the upgrade and whether this could be another “buy the rumor, sell the news” situation like the Merge was or a catalyst for the next DeFi bull run.

And finally, the age-old question: What is going to bring people back into crypto? Will 2023 be the year investors get interested in the space once more, or will we have to wait until 2024 for any sort of real action in the space?

Make sure to stay tuned until the end to get all of these insights and more. Cointelegraph wil also be taking your questions and comments throughout the show, so be sure to have them ready to go.

Market Talks streams live every Thursday at 12:00 pm ET (5:00 pm UTC). Each week, it features interviews with some of the most influential and inspiring people from the crypto and blockchain industry. So, be sure to head on over to Cointelegraph’s YouTube page, and smash those like and subscribe buttons for all our future videos and updates.

Is this a bull run or a bull trap? Watch The Market Report live

On this week’s episode of The Market Report, Cointelegraph’s resident experts discuss whether the recent price rally is a bull run or a bull trap.

This week on The Market Report, the resident experts at Cointelegraph discuss whether the recent and long-awaited Bitcoin (BTC) price rally is a bull run and the beginning of the next bull market or whether it is just a bull trap and investors should be cautious.

We start off this week’s show with the latest news in the markets:

Bitcoin price breakout or bull trap? 5K Twitter users weigh in

Bitcoin is trading at its highest levels in over two months, but the phrase on every trader’s lips is “bull trap.” After delivering 25% returns in a single week, BTC/USD remains under suspicion among Bitcoin bear market survivors. Crypto Twitter is abuzz with everyone from professional traders to crypto newbs weighing in on the recent price action. Some are calling it a bull trap, while others are a bit more optimistic. We take a look at some of the trending tweets to get a feel of the market sentiment right now.

Bitcoin could see $25K by March 2023 as US dollar prints ‘death cross’ — Analysis

Bitcoin shows the potential of stretching its ongoing price recovery to $25,000 by March, based on a mix of bullish technical and macro indicators. We take a look at some of these indicators and discuss what they mean for the price of Bitcoin in the near future.

Bitcoin hits new post-FTX high as analysis warns move ‘choreographed’

Bitcoin hit new two-month highs overnight into Jan. 19 as suspicions over the market’s validity gained momentum. Analyzing order book composition for BTC/USD on the largest exchange, Binance, Material Indicators expressed surprise that those bidding Bitcoin higher had not yet pulled support. Can the markets be manipulated in such a way? Is this something that has happened before or occurs regularly, and how does it impact the overall crypto market? Our experts are here to break it down for you and explain it in easy-to-understand language so you’re not left scratching your head.

Our experts cover these and other developing stories, so make sure you tune in to stay up-to-date on the latest in the world of crypto.

Mining Bitcoin at home — Is it time to start? Market Talks

Join us as we discuss everything you need to know about mining crypto from the comfort of your home. Hosting the show will be Cointelegraph’s head of markets, Ray Salmond, with special guest Justin Kramer.

On this week’s episode of Market Talks, Cointelegraph welcomes Justin Kramer, CEO of Badgerland Home Crypto Mining — a home-based crypto mining equipment business.

This week, to kick things off, we get to know a little bit about Kramer and his mining business. What are his expertise and experience with crypto mining, and how did he gravitate toward it? We also get his take on the current market conditions and the price of Bitcoin (BTC).

Doing anything from your house, whether it’s working from home or mining cryptocurrencies, comes with its own set of challenges, especially when you’re first starting out. We find out what some of those challenges are and how to overcome them. This is especially useful for anyone looking to set up their own mining rig at home. We discuss the five major things you need to realize before you start out and be ready for from day 1.

Mining Bitcoin or any other cryptocurrency is not as clear-cut as it once might have been. Electricity costs are constantly going up, and with the recent continuous downtrend in the price of Bitcoin, one really has to weigh the cost versus the profitability of mining. We ask Kramer what investors or anyone looking to get into crypto mining should do and what is the best way to calculate your costs and profit margins. Should you just have faith that the price of Bitcoin will eventually go up, or maybe there is a way to get exposure to mining without having to run the rigs yourself?

Ever wondered what cloud mining is or how it works? Is it a new form of mining cryptocurrencies, or could it be a new form of scam? The crypto market can be a dangerous place to operate if you don’t have a well-rounded understanding of the space and how to approach something new in the industry, so make sure you tune in to learn about the ins and outs of cloud mining so you’re well-informed.

We also take a look at some of the key metrics and fundamentals miners keep an eye on to stay on top of the latest developments in the mining market and also the overall crypto market.

Make sure to stay tuned until the end to get all of these insights and more. We’ll also be taking your questions and comments throughout the show, so be sure to have them ready to go.

Market Talks streams live every Thursday at 12:00 pm ET (5:00 pm UTC). Each week, we feature interviews with some of the most influential and inspiring people from the crypto and blockchain industry. So, be sure to head on over to Cointelegraph’s YouTube page and smash those Like and Subscribe buttons for all our future videos and updates.

5 signs that an altcoin bull run could be underway

Record-low volatility and potentially positive macroeconomic data are providing crypto traders with a few opportunities.

While 2022 ended on a grim note with macro headwinds providing little hope of a revival in 2023, the start of a new year has surprised bears with a surge in Bitcoin (BTC), Ether (ETH) and altcoin prices. The period of sparse volatility in the crypto market appears to be ending with a breakout to the upside.

The increase has been particularly striking in some altcoins such as Lido (LIDO), Solana (SOL), and Cardano (ADA). The primary factors promoting the spike in these coins are the upcoming Ethereum Shanghai update (for LIDO) and the negative funding rate in the futures market, especially for SOL. The negative rates implies that most traders are holding short positions, giving an opportunity for whale buyers to run their stop losses. Funding rates for some other tokens remain exposed to a short squeeze.

Moreover, the new year has also seen the re-emergence of the degen gambling that had taken a back seat after the collapse of FTX in November. A memecoin price surge is evidence of the residual degen spirit. Technically, the total market capitalization of altcoins has surpassed a key technical resistance level as bullish momentum builds.

While the sustainability of the bull run is questionable due to the broader trend remaining bearish, the fledgling uptrend could still bring some pain for late sellers. The five primary factors influencing altcoin prices are:

Job market data revives the hope of a soft landing

Defying Dow Jones estimates for an additional 200,000 nonfarm payrolls added in December and market expectations of a slowdown, the labor market report showed tha230,000 were added, a 0.2% increase in employment.

A strong jobs market goes against the prevalent recession claims and acts as a catalyst for a risk-on rally. The Consumer Price Index (CPI) reading for December coming out on Jan. 12 will be instrumental in either building on the newfound bullish sentiment or returning to negative sentiments.

If inflation continued its downtrend, with December’s CPI print below 7.7%, then the market’s confidence in a soft landing could increase. However, if inflation rose in December, then the chances of a higher rate hike in the U.S. Federal Reserve meeting toward the end of January increase, risking a steep correction.

Traders hunt for perpetual swaps with negative funding rates

As the spot trading volume and liquidity on cryptocurrency exchanges dried up toward the year-end, especially during the holiday season, futures markets gained more influence in moving the prices. A contrarian price reaction against a crowded trade position is highly likely.

Solana’s latest surge in prices is clear evidence of short-squeeze driving prices. Over the weekend, $200 million in SOL shorts were liquidated as its price surged over 27% from the Jan. 6 low of $13. According to independent market analyst Alex Kruger, “SOL still has room to go but the outperformance phase is mostly behind.”

*Funding rate for SOL perpetual swaps. Source: Coinglass*

While Solana’s pump might be close to over, the majority of traders are still net short on numerous altcoins like Apecoin (APE), Tron (TRX), Bitcoin Cash (BCH) and Gala Games (GALA). This provides an opportunity for buyers to push the price up and hunt the stop-loss liquidity of perpetual swap sellers.

*Funding rate for altcoins across crypto exchanges. Source: Coinglass*

Meme coins pump, then dump

In the first week of January, a Solana-based memecoin named BONK experienced a whopping 25x surge. The rise symbolized the degenerate gambling spirit that was prevalent during the 2021 to 2022 bull run. Bear markets, on the other hand, tend to promote caution among traders.

Despite BONK’s eventual price collapse, the successful pump-and-dump playout of meme coins like it suggest that some traders are still indulging in high-risk plays.

Positive technical breakout

The altcoin market capitalization broke above the 50-day exponential moving average (EMA) at $465 billion. Buyers will likely target the 100-day EMA at $563 billion — an expected average 20% gain across the tokens. Technical traders would look to tap these key levels before reversal begins.

The relative strength indicator (RSI) for altcoin market capitalization also moved into bullish territory, increasing above the 60-point resistance. Furthermore, if buyers build support above the 50-day EMA with positive volumes, the short-term uptrend could extend toward the end of Q1 2023.

*Total* *altcoin* *market capitalization (excluding Bitcoin). Source: TradingView*

Historical trends and positive sentiment spike

The sustainability of the bullish altcoin run is questionable, especially since the underlying trend remains bearish. It’s difficult to identify the fundamental catalyst supporting this bull run, and Bitcoin’s price trades below its resistance of between $18,200 and $19,000. Thus, the uptrend will likely fade as buyers get exhausted.

If we look at previous crypto cycles, altcoins outperformed Bitcoin in a bull run, and the following cooldown period saw a cross-over with Bitcoin leading the crypto market gains.

The recent parabolic run of 2021 played out similarly, with altcoins outperforming Bitcoin. However, the correction period hasn’t seen a wipeout of the altcoin market relative to Bitcoin.

Both altcoin market capitalization and Bitcoin’s price have lost 75% of their value from the peak, as opposed to altcoin losses surpassing Bitcoin.

*Altcoins outperform Bitcoin during bull markets. Source: TradingView*

An exception to the above rule can be due to Ether’s increasing dominance in the market. Ethereum has maintained its market dominance of around 20% with technical breakthroughs such as the shift to an energy-friendly proof-of-stake mechanism and reduced inflation supporting its price strongly despite the negative trend. Still, a deeper correction in the broader altcoin market capitalization cannot be ruled out.

*Bitcoin (orange) and Ethereum (blue) dominance over the crypto market. Source: TradingView*

Lately, social media circles have witnessed a revival of positive sentiment. Santiment data shows that the social media mentions of keywords like “buy the dip” and “bottom” spiked on platforms like Twitter, Reddit, and Telegram. Usually, a positive sentiment spike is a top indicator suggesting a reversal of the bullish price trend.

*Social media volume for “buy the dip” and “bottom” key words. Source: Santiment*

One of the first hurdles will be supporting the price after a wipeout of short orders. Being two of the first tokens to surge, Solana and Cardano could provide clues that point toward the end of the uptrend.

If the price of SOL breaks below support at $14.33 with a simultaneous drop below $0.30 for ADA, it could be a warning sign of the bull’s exhaustion.

At the same time, tokens like LIDO that benefit from the liquid staking derivative narrative could continue to rise until Ethereum core developers implement the Shanghai upgrade. Macro market movers such as the CPI print and Bitcoin’s price action will also play a crucial role in sustaining an altcoin bull run.

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