Crypto Ecosystem

Could altcoin season appear in the short term?

, November 9, 2023

In this week’s crypto highlights, we explore the price movements of BTC, TWT, DOT, and CAKE. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

PayPal received subpoena from the SEC regarding its stablecoin

According to the company’s Q3 financial report, the U.S. Securities and Exchange Commission (SEC) served PayPal with a subpoena for its PayPal USD (PYUSD) stablecoin. The SEC reportedly asked the company to provide its documentation. PayPal confirmed it is cooperating with the regulator regarding this request. In August, the company was the first among financial giants to launch its own stablecoin.

However, on the other side of the Atlantic Ocean, PayPal recently experienced better regulatory results. The company successfully registered with the U.K. Financial Conduct Authority (FCA) as a crypto service provider.

Kraken is considering launching its layer 2 network

Coindesk reported that the Kraken crypto exchange is planning to work with major blockchain technology companies to establish its own layer 2 (L2) network. Polygon, Matter Labs, and Nil Foundation were named as some of the potential partners, among others. However, the conversations are ongoing, and have not been made public.

This move follows Kraken’s competitor, Coinbase, which introduced its own L2 network, Base, this year. The Base employs the OP Stack technology from Optimism.

Hong Kong welcomes spot crypto ETF proposals

According to Bloomberg, Hong Kong’s Securities and Futures Commission (SFC) Chief Executive Officer Julia Leung said that the regulator is considering providing retail investors with access to spot crypto ETFs. She also reportedly stated that a crypto ETF will need proper risk management, especially after the collapse of the Hong Kong crypto exchange JPEX earlier this year. At the time of this writing, the regulator approved two Bitcoin futures ETFs, and one Ethereum futures fund.

Some crypto community members were excited about this news. For instance, BitMEX co-founder Arthur Hayes said that such competition between China and the U.S. could be great for Bitcoin. There is also an opinion that the potential launch of a spot crypto ETF in Hong Kong could put pressure on the U.S. SEC to potentially approve spot Bitcoin ETF applications.

OpenSea cut its staff by 50%

Devin Finzer, co-founder and CEO of NFT marketplace OpenSea, announced that almost half of the company’s employees have been laid off. He said that this move is a part of a major restructuring exercise. The new OpenSea 2.0 strategy assumes a smaller team, with direct communication with users.

Following this news, the native token of a rival NFT platform, Blur, surged by over 80% in a few days. Blur is widely considered one of the catalysts behind OpenSea’s decreased market share.  

According to The Block, Blur introduced a “minimum 0.5% royalty fee, coupled with attractive airdrops and bidding incentives.” As a result, “it was difficult for OpenSea to compete” with its existing business model. In order to maintain market positions, OpenSea tried to reduce fees, but failed to stymie Blur’s momentum.

One sentence news

  • Sam Bankman-Fried, founder of FTX, was found guilty on all seven counts of fraud and conspiracy, reportedly facing up to 115 years in prison.
  • The U.S. Department of Justice (DOJ) and the SEC arrested and charged SafeMoon’s executives for allegedly committing securities fraud, wire fraud, and money laundering.
  • The SEC faces difficulties hiring crypto experts, because they are required to sell all of their crypto holdings to get the job.
  • On November 1, PeckShield, a blockchain analytics company, reported that decentralized finance protocol Onyx suffered a security exploit, leading to a loss of more than $2.1 million.
  • According to Bloomberg, DWS Group, the $900 billion German asset manager, is preparing to introduce crypto exchange-traded funds in the following months.
  • The Arbitrum community voted in favor of the initiative to allocate 1% of ARB tokens from the treasury for staking yields.

Notable price performances

Bitcoin dominance faced the first major drop in months

Of late, Bitcoin was enjoying a vacation on a crabby island, as its price continued consolidating, predominantly sharing a cocktail with the $35,000 level. However, altcoins stayed awake and actively outperformed Bitcoin over the last seven days. As a result, Bitcoin dominance decreased by almost 1.5% in a week, which is the largest drop since August of this year, according to TradingView data.

Some call it a rotation of BTC gains to altcoin markets, widening the recent rally. Others consider that such market behavior could be one of the first signs of a potential altcoin season. Here are some other indicators:

  • Glassnode reported a recent “substantial increase in altcoin sector market valuations since the last cycle peak.”
  • The total value locked across all chains reached a three-month high.
  • Even Bitcoin Ordinals, which are typically used to create memecoins and non-fungible tokens (NFTs) saw a new boost, sending Bitcoin transaction fees to a five-month peak.

So is altcoin season around the corner? First of all, there is no single official way to declare it. However, one of the most popular approaches assumes that 75% of the top 50 altcoins, excluding stablecoins and asset-backed tokens, should outperform Bitcoin for 90 days. If this happens, altcoin season is arguably in bloom. 

According to Blockchain Center, the crypto market recently made a bare move out of the “Bitcoin season” zone. Historically, even in the best scenarios for altcoins, it would take several months to reach the “Altcoin season” area from that point. However, for that to happen, there must be major catalysts in favor of altcoins. With most crypto enthusiasts anticipating potential spot Bitcoin ETF approval in the coming months, it could be difficult to shift market attention to altcoins in the short term.

In addition, it seems Bitcoin said “Hold up, wait a minute,” after observing how altcoins recently outperformed it. As a result, Bitcoin set a new 2023 high, moving above $37,000. This move appeared amid rumors about negotiations between the SEC and Grayscale to turn GBTC trust into a spot Bitcoin ETF.

Bitcoin price is still moving inside an ascending channel (white channel) described in our previous crypto highlights. This means there is a chance for a flag pattern to work out, pushing the asset price to $40,000.

However, the daily RSI is arguably forming a bearish divergence. This hints that bullish momentum might be fading, and price correction may follow. If the ascending channel is broken downwards, the 20-day EMA could act as the closest target for bears.

TWT price dropped amid Binance’s new wallet launch

Trust Wallet’s native token, TWT, fell by 16%, after Binance announced its “self-custody” wallet with similar functionality. Binance acquired Trust Wallet in 2018, so this new wallet may seem like a simple desire to play with new toys. 

However, the term “self-custody” is in quotes for a reason. Although the crypto exchange positions the new wallet this way, it’s essentially centralized. According to its terms of use, Binance’s “Web3” wallet is only accessible to verified Binance users, user transactions can be canceled, and the wallet itself can be frozen. Trust Wallet is considered self-custodial without quotes, so the new Binance wallet may not actually become a direct competitor.

Shortly before the wallet announcement, the TWT price was surging by over 60% amid the listing of TWT futures on Binance. The golden cross was formed on a daily chart, suggesting the asset may continue its upward trend. However, a breakout of the 0.382 Fibonacci point could push the asset to the 20-day EMA.

DOT price took advantage of the Cardano partnership

In a recent tweet, Polkadot revealed that Cardano plans to utilize Substrate, the Polkadot SDK’s base, for its upcoming “partner chain” initiative. Charles Hoskinson, the creator of Cardano, introduced a novel architecture at the Cardano Summit 2023, providing developers with new ways to use Cardano’s core features, and new technology for running partner chains. A collaboration between Polkadot and Cardano could potentially provide benefits for both blockchain networks.

Amid this news, the DOT price broke its eight-month-long descending resistance line (white line). At the time of this writing, the DOT trading volume continues to increase, suggesting that the asset may try to sustain above the $5.20 level. If it fails, it could retest the 200-day SMA, and/or the former descending resistance line. The daily RSI is in the overbought zone, hinting that upward movement may slow.

CAKE price temporarily joined the top climbers’ club

From October 21 to November 6, the CAKE price surged almost 150%, approaching a major resistance level of $2.50. Some of the catalysts behind this rally could be PancakeSwap’s launch of its asset management feature, a listing of USDS-M CAKE perpetual contracts, and the general increased trading volume on PancakeSwap.

The asset reached the overbought zone, and has already started experiencing a price correction. If bulls fail to sustain the price above $2.15, the price could explore 0.382, and/or 0.5 Fibonacci points.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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