Crypto Ecosystem

Bitcoin arguably reached the midpoint of this cycle. What could follow?

, July 13, 2023

In this week’s crypto highlights, we explore the price movements of BTC, SOL, APE, and ALGO. 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

Gemini initiated legal action against DCG and Barry Silbert

The crypto industry is about to witness its equivalent of the Musk vs. Zuckerberg tech match. However, instead of an epic rap battle or a cage fight, the fight is likely to take place in court.

On July 4, Gemini co-founder Cameron Winklevoss published an open letter to Digital Currency Group (DCG) CEO Barry Silbert, calling it the “final offer,” and proposing a payment plan for Genesis creditors. The offer included a plan for $1.465 billion in forbearance payments and fresh loans denominated in U.S. dollars, Bitcoin, and Ethereum. The letter also stated that the agreement had to be made by July 6, or legal action would follow.

Then, with no response from DCG, Winklevoss announced on July 7 that Gemini filed a lawsuit against DCG and its CEO, alleging fraudulent activities. According to Winklevoss, DCG and Silbert were involved in a scheme to hide Genesis’s insolvency, which affected Gemini Earn users. DCG is the parent company of Genesis.

DCG representatives called the Gemini lawsuit “another publicity stunt” by Cameron Winklevoss, designed to “deflect blame and responsibility from himself and the company.”

Multichain suspended its operations amidst over $100 million token drain

On July 6, PeckShield reported that Multichain experienced unusually large, unauthorized withdrawals of crypto assets, worth more than $125 million. The transferred tokens included USDC, WBTC, WETH, DAI, USDT, and other assets. They were taken out of Multichain’s Fantom bridge on the Ethereum side, as well as Dogecoin and Moonriver bridges. The Fantom Foundation assured its community that the Multichain incident did not affect the network’s native tokens.

The next day, the Multichain team confirmed that the assets were moved without authorization, and they started an investigation into the incident. The team also recommended that users suspend the use of Multichain services, and revoke all contract approvals related to Multichain. Circle and Tether froze $65 million in assets withdrawn from Multichain.

On July 10, Chainalysys stated that the exploit may have resulted from compromised administrator keys, suggesting it could potentially have been an “inside job,” or a “rug pull.” Chainalysis said the most obvious example of these internal issues was the disappearance of Multichain’s CEO, known as “Zhaojun,” in late May. 

On July 11, blockchain researcher Colin Wu informed crypto participants about another large number of abnormal outflows from Multichain, worth $117 million. This sparked more speculation that the event looks like an inside job, rather than a hack.

BarnBridge DAO arguably faced SEC investigation, halts operations

In a statement on its official Discord presence, BarnBridge DAO revealed that it is currently under investigation by the U.S. Securities and Exchange Commission (SEC), along with “individuals associated with it.” As a result, the DAO announced it would be closing all liquidity pools and suspending the creation of new ones. Additionally, all ongoing development efforts related to BarnBridge products have been put on hold. Those involved with the DAO will not receive compensation until further notice.

The SEC’s investigation into BarnBridge DAO, a project some regarded as “one of the tamest projects DeFi has known,” raised concerns among crypto enthusiasts. Some view this as a warning sign to other DeFi projects. At the same time, there were skeptics, asking for proof of the SEC’s investigation, and speculating about a potential rug pull. Douglas Park, the project’s legal counsel, stated that only limited information can be disclosed publicly at this time.

Grayscale argued against SEC approval of leveraged Bitcoin futures ETF

In a letter dated July 10, Grayscale notified the U.S. Court of Appeals for the District of Columbia Circuit about the listing of Volatility Shares 2x Bitcoin Strategy ETF (BITX), which became the first leveraged crypto ETF available in the U.S. 

Grayscale’s legal team argued that the Volatility Shares ETF presents an investment product that carries “even greater risk” than BTC futures ETFs, potentially serving as a precedent for the SEC to consider approving their own offering.

The asset manager filed legal action against the SEC in June 2022, after the SEC denied an application to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF.

One sentence news

  • In its latest filing in an enforcement action against Coinbase, SEC lawyers questioned the validity of the company’s argument that it did not know it violated securities laws.
  • PeckShield reported that DeFi protocol Arcadia Finance suffered a hack, losing $455,000 in the process.
  • Bankrupt crypto lender Celsius moved $74 million worth of altcoins to convert to Bitcoin and Ethereum, as a part of its redemption plan.
  • Shiba Inu’s layer 2 network Shibarium will be launched in August, according to the project’s blog.

Bitcoin is consolidating near the weekly mean reversion level

Hacks, lawsuits, and investigations… It seems crypto markets decided to play “the floor is a lava” this week. 

Despite this, the mainstream narrative around Bitcoin is shifting rapidly, and becoming more positive. Digital asset funds continued experiencing inflows, with Bitcoin as a major focus among institutional investors. This helped GBTC to narrow its discount to the lowest level since May 2022. 

In addition, BlackRock CEO Larry Fink called the largest cryptocurrency a “hedge against inflation.” Analysts of the multinational bank Standard Chartered claimed that the BTC price could reach $50,000 this year, and $120,000 next year. 

According to them, one of the major catalysts for this could be potential supply shock. For instance, Ark Invest reported that nearly 70% of the total Bitcoin supply was held for one year or more, which is an all-time high. Bitcoin supply left on exchanges reached the lowest point in five years. 

At the same time, Bitcoin accumulation continues to take place among both whales and shrimps. Therefore, as the available amount of BTC to trade decreases, increased demand and strong accumulation could become a major driver for the Bitcoin price.

According to Glassnode, Bitcoin reached the midpoint of this cycle, similar to the one the asset experienced in previous cycles. It hints that the price could move predominantly sideways for several months, with potential range widening due to re-accumulation.

These cycle midpoints seem to correspond with weekly mean reversion levels (cyan, purple, and yellow horizontal lines). Previous cycles suggest that the Bitcoin price is likely to consolidate near the mean level, before sustaining above it. After its breakout, a bearish divergence may follow, pushing the asset to retest the weekly mean point. 

If this happens, the next potential target for Bitcoin could be near $40,000, where the price crossed the mean reversion level in this cycle. After reaching it, the asset may experience a correction.

However, Bitcoin has already formed a bearish divergence on a weekly timeframe (white line). This indicates that the price may continue consolidating in the short term, or experience a slight correction before a potential breakout of the weekly mean reversion level.

The daily timeframe also suggests that bears could have more power in the short term. The asset is consolidating near $31,000, and made several failed attempts to sustain above it. At the same time, RSI formed a bearish divergence, while the Awesome Oscillator hints at fading upward momentum. 

The Bitcoin price reached the 20-day EMA, and the following price movement could depend on whether or not the asset manages to defend it. If failed, this could open the road to $28,500 and the 50-day SMA. If successful, the market may see another Bitcoin rally.

SOL price took advantage of social volume increase

Solana became one of the top performers among the top 100 digital assets by market cap, with a price surge by more than 15% in a week. According to Santiment, Solana experienced increased traction on social media, especially on Reddit, with a narrative that the project is “still standing.” 

In addition, the Solana ecosystem saw a more than 30% monthly increase in total volume locked (TVL) among liquid staking platforms. However, overall Solana TVL is still 97% below its all-time high, according to DeFiLlama.

The SOL price broke the descending resistance line (white line), pushing daily MACD above the zero point. However, RSI approached the overbought level, and started to form a bearish divergence on lower timeframes. New SOL price highs were also accompanied by decreased volume, hinting at fading momentum. This suggests that the asset may soon retest the $20 support area, or the former descending resistance line. 

APE price updated its all-time low

According to CoinGecko, on July 7, the APE price dropped to $1.85, updating its all-time low. At the time of this writing, the asset is trading 92% below its all-time high. It was supposed to work as a gateway to the Bored Apes Yacht Club (BAYC) non-fungible token (NFT) ecosystem, but the prices of its NFTs also dropped by over 90%. This trend aligns with the rest of the NFT market.

A potential catalyst behind this move could be massive liquidations. For instance, at the beginning of this July, there were more than 1,200 liquidations of NFT loans. For a better perspective, this number was 10-15 in a day on average over the last year. In addition, there aren’t many new active addresses, meaning NFTs are typically traded between the same market participants. 

However, the asset formed a bullish divergence (white lines), hinting that the price recovery may follow. If the price sustains above $2, this could drive it to the 20-day EMA, or even the $2.47 resistance area. Nevertheless, even if a rebound happens, it could become a so-called “dead cat bounce” due to a lack of fundamentals that can support bullish momentum.

ALGO slides down amid Algofi shutdown

On July 11, Algorand’s largest decentralized finance protocol, Algofi, announced that it will wind down its operations. The project’s team stated that they will set the platform in “withdrawal-only mode.” Algofi contributed more than 50% of TVL within the Algorand ecosystem. 

For now, the ALGO price hasn’t significantly reacted to this news. But as more than $30 million worth of tokens available on Algofi will be withdrawn, it could put additional bearish pressure on ALGO markets. This means ALGO has the potential to update its all-time low that it reached last month.

Daily RSI and MACD are in negative territory, indicating that the path of least resistance could be downward. However, if the asset defends the $0.11 support area, it may try to break the 20-day EMA. 

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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