Crypto stuck in macro limbo but bear market building continues

Total mcap: $0.952 tn | BTC dom: 38.88% | Crypto FGI: 22

Last week saw little volatility in the crypto market, except for a seesaw session on Thursday, Oct. 13.

Following the release of the U.S. hotter-than-expected inflation reading, Bitcoin (BTC) initially plunged sharply to its new October low of $18,299 before the downturn was quickly reversed.

Other than that, Bitcoin price changed little during the past 7 days — rangebound between \(19,000 and \)20,000 during most of the week. This pattern yielded a 1% weekly gain for BTC, as the largest cryptocurrency was hovering just over $19,300 at the time of publishing.

Ether (ETH) followed a similar pattern to Bitcoin on the day of the CPI release, quickly rebounding from a 5% drop. Since then, ETH held a sideways pattern, closing the week roughly higher than where it started and changing hands over $1,300 at the time of writing.

The broader crypto market traded sideways, closing the week with a red tint for top cryptos other than BTC and ETH. Cardano’s ADA and Ripple’s XRP faced the largest losses, down about 10% and 6%, respectively.

The minor gains seen in Bitcoin and Ether were not enough to help the total crypto market capitalization regain the $1 trillion mark. Meanwhile, the Crypto Fear&Greed index is tranquil in the zone of ‘Extreme fear’ below 25 points amid the low volatility environment.

Yet another sign for macro tightening

A higher-than-expected U.S. inflation reading caused a knee-jerk sell-off not only in crypto, but also in the other riskier asset markets. NASDAQ dipped 3% on Oct. 13 before the losses were recovered during that wild trading day.

This abrupt drop in prices wasn’t indicative of rising investor fears because of a more aggressive rate hike from the Federal Reserve like it happened in the months before.

In fact, with the Consumer Price Index (CPI) announcement nothing changed in the macro environment, only bringing a short-term negative effect on the markets. Inflation was already expected to have remained hot, being certainly far from the 2% target set by the Fed.

The persistently high inflation combined with unemployment below the target rate of 4% - proof of a strong labor market - could only yield the Fed one possible decision: another interest rate hike.

So the scene for the upcoming Fed’s hike of at least 75 basis points was already set and priced in by the markets. The latest CPI release was only to confirm further the Fed’s hawkish response to it in the next Federal Reserve meeting on Nov. 1 and 2, and thus didn’t fuel a painful sell-off in the markets.

As we mentioned in the previous issue of Coin360 Weekly, the Fed is looking for 125 bps rate hikes over the next two meetings. It’s already clear that the Fed is not going to give up its rate hike streak anytime soon, as it is likely to take interest rates to a 4.5%-5% range and hold them there through the end of 2023 to tame inflation.

For crypto, this means growing pressures on prices in the long term. It is now a question of whether we will actually see the decoupling of cryptos from equities, a phenomenon that was observed in the markets during September and October of 2022.

If S&P and NASDAQ were to lose another 10-20% in value, USD would get even stronger, and investors may move out of risk-on assets. Could crypto sustain this bearish trend for another year?

Keeping the momentum going (altcoin gainers)

HT: Huobi, a centralized cryptocurrency exchange, saw its native token HT surge up to 30% over last week for gains of 70% over the last 30 days. The token likely rallied on the arrival of Justin Sun, founder of Layer 1 protocol Tron (TRX) , as an advisor to the crypto exchange.

After the deal under which Huobi founder Leon Li sold his entire stake in the exchange to About Capital, rumors broke that the investment fund is majority funded by Justin Sun.

Sun later revealed his role as Huobi’s advisor on Oct. 10, an announcement that moved HT’s price by up to 24% in the hours after. Justin Sun also confirmed that he was one of the biggest holders of HT as reports linked some 74 million tokens to his wallet.

Meanwhile, the native coin of Tron, TRX, barely reacted to the news, down 1% for the week. 
QNT: The native coin of Quant network, the developer of an enterprise-focused interoperability blockchain solution Overledger, soared roughly 29% this week to move into the top 30 coins by market capitalization.

Often seen in Coin360’s largest weekly gainers recently, QNT turned out to be one of the strongest performers amid the current bear market and its price has almost doubled over the past three months.

Trading at \(195 at press time, QNT boasts a market capitalization of \)2.362 billion, outcoming such well-known cryptos as Algorand’s ALGO and VeChain’s VET.

The QNT token is used to pay fees to access the technology. You can learn more about Quant Network, its products and prospects, using the coin page on Coin360.com.

CSPR: Being among the top weekly performers, Casper Network, proof-of-stake enterprise blockchain, saw its token price going parabolic. The gains for the CSPR came in two distinct waves, which together pushed the token price to the highest level since May 2022.

The first wave of gains came as CSPR jumped 18% the week after Casper Labs — the team behind Casper Network — revealed a new enterprise-grade NFT standard on its blockchain. The token added another x% between Oct. 15 and 17, after Casper Labs announced the launch of Casper 2.0 in Q1 2023.

The network upgrade will introduce new capabilities, including an improved consensus mechanism, unified accounts and contracts, and an open validator model. However, the vector of development revealed by the Casper team fails to provide a solution for CSPR’s troubled tokenomics, which may have long-term implications for the token holders.

Losing steam (altcoin losers)

APE: ApeCoin, the token for the Otherside Metaverse, developed by Yuga Labs, dropped 14% over last week to trade below $4.5 on the news of an SEC investigation. According to Bloomberg sources, Yuga Labs, the creator of Bored Ape Yacht Club and owner of the IP for Cryptopunks and Meebits NFT collections, is at the center of a probe for security law violations.

The $4 billion company is facing a probe over whether its digital assets are securities and should be treated like stocks and whether Apecoin, the token for its Otherside Metaverse, should be considered a security.

The United States Securities and Exchange Commission (SEC) probe into Yuga Labs is actually part of a wider investigation into the nonfungible token (NFT) market, which is looking at whether certain NFTs and fractional NFTs could fall under federal securities laws.

GMT: The governance token of a once extremely popular move-to-earn project, Stepn, was down nearly 12% this week, while its losses from all-time-highs seen in April 2022 extended to 85%. The project’s utility token, GST, also saw a massive drawdown as a result of overinflation, trading 99% lower than its peak price of $7.92, seen on Apr. 29, 2022.

Coming off as a classic example of a bubble in the crypto market, Stepn reported ‘astronomical growth’ of its user base of over 2.3 million monthly active users and over half a million daily active users, as of early May 2022.

The M2E project tripped on the Terra (LUNC) crash and turmoil in the broader crypto market alongside its internal issues, including a ban of mainland China users and a series of DDOS attacks in June. That explosive growth was followed by an explosive decline.

Stepn’s inflationary tokenomics resulted in the project struggling to gain new users as its profitability went down considerably. The project’s later attempts to fix its in-game economic model barely yielded any results as its DAU dropped by 80% and continues to decline.  

The recent price drop came amid controversial reports that the app laid off over 100 contract workers. Crypto reporter Colin Wu initially alleged that moderators and ambassadors would be among the sacked staff, and investment in STEPN would be scaled back. Stepn later denied the rumors in an interview with Cointelegraph. 

ETHPoW: The native coin of an Ethereum fork that continues to run on a proof-of-work (PoW) consensus mechanism found itself struggling through October as ETHPoW slumped 11% over last week to extend its loss since the Ethereum merge to 82%.

Despite making a lot of noise in the cryptocurrency market at the fork, the new network seems to be falling short of its goals as the hype surrounding the venture dries out.

Earlier this month, Ethereum PoW released the first batch of projects launched on its network, promising a robust ecosystem for its users. Yet, ETHPoW sees the trading volumes of the forked coin plunging after its price crashed post-merge.

Solana killers have arrived?

The recent hack of a Solana-based protocol Mango Markets (MNGO) was yet another issue that put Solana’s (SOL) future as an Ethereum challenger under consideration.

Earlier this October, Solana suffered a network outage caused by a validator running a duplicate validator instance, which ended up causing an inadvertent fork. The outage on Oct. 1 joined the string of outages and transaction stops this year, including a handful of partial outages in January.

Since the Layer-1s season we saw back in Q4 2022, the narrative of Solana being an ‘Ethereum killer’ mostly faded. Amid harsh crypto winter, SOL shed 88% from its peak of $259 seen on Nov. 6, 2021. 

Meanwhile, Solana’s TVL slashed 90% from just under \(10 billion seen in late 2021, with the Mango exploit bringing TVL below \)1 billion for the first time since July 2021, according to DeFi Llama.

In a market that is always in search of a new ‘thesis’, it is no surprise that the narratives of ‘Solana killers’ emerged in response to the blockchain’s technical issues. 

As such, the two networks, Aptos and Sui, both with origins from Meta and both having code written in the Move programming language, appear to try and usher in a new high-profile generation of blockchains. The two took direct aim at faster and cheaper alternatives to existing layer-1s for building a new decentralized financial system.

Aptos launched its mannet on Oct. 18, becoming the first of the Facebook spin-off networks to premiere. In testing, Aptos asserts that it was able to process 130,000 transactions per second, more than 4,300 times more than Ethereum currently does. There were no user transactions yet to prove the network’s whopping TPS.

Prior to the launch, Aptos secured a $200 million funding round in March 2022 with participation from major VCs in the crypto industry, including Tiger Global, Multicoin Capital, FTX Ventures, Coinbase Ventures, Binance Labs and PayPal Ventures.

The second funding round came just 4 months after, when Aptos closed a Series A round led by FTX Ventures and Jump Crypto, with participation from Binance Labs. The \(150 million funding round set the company’s reported valuation at \)2 billion.

Aptos token is expected to debut in the crypto market tomorrow, Oct. 19. With controversy surrounding the project’s tokenomics and specifically the allocations of Aptos tokens, it has become a trending topic in the crypto space starting off the new week.

As Decrypt puts it, the potential retail investors are questioning ‘hefty token allocation (49%) given to developers and private investors, giving rise to quips that Aptos is a blockchain catering to venture capital.’ 

Another factor to spoil the party for Aptos price is an ongoing lawsuit against Aptos Labs’ CEO Mohammed “Mo” Shaikh filed by entrepreneur Shari Glazer, who claims to have been cheated out of equity as an early investor.

Having a rocky start already, Aptos isn’t living up to those brisk expectations on its first days. Tomorrow’s listing on FTX and Binance is likely to become pivotal in Aptos’ path to becoming a serious contender to Solana.

Yet, the map of competition will not be complete until Sui network also launches its mainnet. Having similar technical characteristics as both Aptos and Solana, it may have a chance to build upon the mistakes its competitors made.

It may be an exciting battle between the three to watch as three blockchains with similar designs may find it hard to find their own niche to develop in, which means there may be only one network left standing in the long term.

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Disclaimer: None of the information here constitutes financial advice and market participants are advised to conduct their own research since cryptocurrencies are speculative assets with considerable risks.