Crypto Ecosystem

Is Bitcoin in the latter stages of a bear market?

, February 10, 2023

In this week’s crypto highlights, we explore the price movements of BTC, GRT, OP, and SAND. Additionally, this recap includes a few notable industry news that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

DCG and Genesis reached an initial agreement with top creditors

Digital Currency Group (DCG), and its bankrupt Genesis subsidiaries, reached an in-principle agreement on terms of a restructuring plan with a group of the firm’s main creditors. The move looks to remove the Genesis loan book, and will include the sale of Genesis entities. The term sheet also involves refinancing outstanding loans, where DCG borrowed $500 million in cash, and about $100 million worth of bitcoin (BTC) from Genesis.

Genesis will exchange its existing $1.1 billion note, due in 2023, for convertible preferred stock to be issued by DCG as part of Genesis’ bankruptcy plan. The proposed deal was offered to other creditors.

As a result of these events, Genesis and Gemini reached a $100 million agreement over the crypto exchange’s Earn program. Gemini’s co-founder Cameron Winklevoss stated that the plan was a “critical step” toward recovering assets.

In addition, Financial Times cited U.S. securities filings, reporting that DCG was selling shares in Grayscale crypto trusts in a push to raise funds. According to the news outlet, DCG’s recent share sales focused on the Ethereum fund, where the group has moved to sell about a quarter of its stock to raise as much as $22 million. The company sold shares at a 50% discount. DCG confirmed that this action was a part of ongoing portfolio rebalancing.

Andreessen Horowitz voted against Uniswap deployment on BNB Chain

Venture capital firm Andreessen Horowitz (a16z) used all its 15 million UNI tokens to oppose the deployment of the Uniswap v3 protocol on the BNB Chain, using the Wormhole. The Block’s research director Stephen Zheng noted that this is the first time a16z has voted against a Uniswap-related proposal. According to him, it’s also the first time the company used all the tokens available to it.

At the moment of this writing, 77% of votes support the Uniswap v3 deployment on the BNB Chain via Wormhole. The vast majority of tokens allocated against the proposal are related to a16z. Voting on the proposal will end on February 10.

A relevant proposal was shared on January 22. As part of a preliminary vote, the community approved the initiative. Wormhole was selected as a cross-chain bridge between Ethereum and BNB Chain. Second place went to LayerZero, in which a16z invested back in March 2022.

This story fueled drama in the crypto community, highlighting that whales have significant control in the Uniswap ecosystem, and may promote projects in which they have an interest. However, some crypto experts urged the Uniswap community to stop voting on the proposal, and consider deploying Uniswap v3 via several bridges for security reasons. Experts highlighted that the solution, with only one cross-chain bridge, creates a single point of failure for the protocol.

Ethereum developers launched Zhejiang testnet to simulate staking withdrawals

On February 1, the Zhejiang testnet was launched to simulate ETH withdrawals from the Beacon Chain staking contract. At the time, users were only able to deposit ETH using Zheijang’s faucets.

On February 7, a hard fork took place in Zhejiang, which activated staking withdrawals via Shanghai and Capella (also known as Shapella) forks. The Shanghai fork is dedicated to upgrading the Ethereum execution layer, while the Capella fork is focused on the network’s Beacon Chain consensus layer. ​​

According to Ethereum developers’ execution call notes, they will decide on an activation date for releasing the upgrade on the Sepolia testnet during the next call on February 9. Once the Sepolia testnet is upgraded, sometime in mid-February, developers plan to release the upgrade on Ethereum’s Goerli testnet (ETA late February or early March).

U.K. officials proposed a new authorization regime for crypto companies

After consultation with crypto industry members and experts, U.K. officials proposed a new authorization regime for crypto companies operating from, or serving local clients, in the region. The document stated that “crypto firms already registered under the money laundering regulations regime and carrying out those activities would be required to also seek authorization under the new Financial Services and Markets Act (FSMA)-based regime.”

The proposal has garnered a largely positive reaction from the industry, as many companies have complained about lengthy delays and tough Financial Conduct Authority (FCA) procedures.

The document covers a broad scope in terms of geography, crypto types, and activities. As such, foreign trading venues could be forced to set up a subsidiary in the U.K.. The plan would also apply to utility tokens and non-fungible tokens (NFT), if they are being used for financial services such as lending, payments, and investment.

BTC formed a golden cross on a daily chart

The Bitcoin price rallied 40% in January, fueling both euphoria and skepticism about the continuation of upward movement. Although the overall sentiment is uncertain, some on-chain and technical analysis metrics suggest that the asset could be in the later stages of a bear market.

One of the bullish factors is the divergence between long-term holders (LTHs) and short-term holders (STHs) of Bitcoin — 78% and 22% accordingly. LTHs are defined as addresses that hold Bitcoin for more than six months, while STHs keep coins for less than that. In previous cycles, such a situation correlated with a bottom in Bitcoin price.

In addition, a disproportion between a supply that was last active more, and less, than a year ago continues to increase, indicating that selling pressure is potentially decreasing. Bitcoin accumulation is approaching its 2015 all-time high, when it also experienced its bottom.

Bitcoin’s price chart indicated a formation of the golden cross pattern on a daily timeframe (blue circle). The golden cross occurs when the 50-day MA crosses the 200-day MA from the bottom to the top. In previous cycles, this pattern indicated long-term upward movement (orange circles), despite a potential downward movement right after its formation. The golden cross that appeared in February 2020 (red circle) could be considered an anomaly, as the price moved down amid a black swan event (the beginning of the COVID pandemic).

However, the four-hour timeframe continues to show bearish signs in the short term. The Bitcoin price is moving in the ascending channel, while RSI is inside the downtrend. Such a divergence indicates that bullish momentum could gradually fade away. The closest resistance levels are near $22,400 and $21,300.

GRT jumped by over 100% in a week

On February 3, analytics firm Messari reported that The Graph witnessed a 66% quarter-over-quarter increase in GRT revenue from query fees in Q4 2022. In addition, active subgraphs, which are used to gather on-chain data, grew steadily over the past 18 months. A few days after the first report, Messari announced that it had built a subgraph to index Aave v3 data.

It helped the GRT price move from $10 to $23 in a few days. Another catalyst could be the recent performance of tokens related to artificial intelligence (AI), which surged amid the ChatGPT effect. The Graph is also considered an AI-related token.

Recent price performance pushed the asset to the overbought zone, and led to the correction. If it continues, the next potential targets could be 0.382 and 0.5 Fibonacci levels, or around $0.16 and $0.14 respectively.

OP reached a new all-time high

Optimism Foundation proposed a mainnet upgrade called Bedrock to boost the performance and functionality of the Optimism network. The update is dedicated to introducing modular architecture, which could help decrease transaction costs and improve throughput. If the community approves the proposal, it is expected to be implemented on March 15.

The Bedrock proposal accelerated the rally of Optimism’s native token OP. According to Coingecko, the price OP price reached a new all-time high of $3.19, which is near the 1.61 Fibonacci level. This level could act as a potential target for a new all-time high, after a breakout of the previous one. Whether OP manages to break out above it, or gets rejected, could determine the future trend.

However, a rapid price movement formed a bearish divergence (white lines), indicating that correction must follow soon. The closest support levels are near $2.78 and the previous all-time high of $2.34.

SAND moved up ahead of the token unlock

On February 7, Sandbox co-founder Sebastien Borget announced a memorandum of understanding (MOU) with the Saudi Arabia Digital Government Authority (DGA) to support Metaverse efforts. MOU is typically considered a prelude to a more permanent partnership. The same day, Sandbox announced a partnership with Cut the Rope developer, Zeptolab, to “build new Web3 experiences.”

It pushed the SAND price by more than 30% in a day. Increased optimism could help the asset reach the $0.98 resistance level.

However, as we mentioned earlier, Sandbox will unlock 348 million SAND tokens, or approximately 12% of the total supply, on February 14. Token unlocks are typically considered bearish factors. For example, the previous token unlock on August 14 reestablished downward movement.

The asset is also experiencing bearish divergence (white lines), supporting the bearish narrative. It could move the price to $0.72 and $0.52, which are considered major support levels.

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: Not investment advice. Seek professional advice. Digital assets involve risk. Do your own research.

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