Bitvavo Market News - Crypto is now political

Most tokens were in the red last week, with the exception being AI tokens which bucked that trend. It's also an important year for Americans as they prepare to participate in another presidential election. Last week, former President Trump offered some unusually positive remarks about the crypto market. Why? Find out in this edition of Bitvavo Market News. But first, the market update.

Market update

Last week saw another tumultuous decline in the crypto market, but since then, a sense of calm has returned. The price of bitcoin is fluctuating around €58,000 and the price of ether around €2,800. In the short term, the trajectory is clearly downward, characterized by lower highs and lower lows, making this a correction following the immense price surge of the previous six months.

Here we have the monthly bitcoin chart. During April, the price fell 14% making this the first instance of a loss after seven consecutive months of gains. Sentiment may have been quite negative recently, but April's decline when expressed in euros cannot fully negate the gains of March.

The chart clearly illustrates that trading in March and April almost entirely surpasses the peaks of 2021. We can also see that the price is trading well above the 10-month average, a sign of a robust long-term upward trend.

In summary, what's in front of us is both a weak, short-term decline and a robust, long-term ascent. A characteristic feature is that during such a correction, activity declines. We can see this in on-chain metrics such as the number of active addresses and the on-chain transaction volume. Trading volume on exchanges notably decreased in April compared to March.

The graph below shows the inflow of capital into bitcoin. The light blue represents the total money flows based on the change in the  realized cap. The dark blue represents the flows into U.S. spot bitcoin ETFs. Again, a clear decline is visible after the peaks in February and March.

Periods of calm and volatility often alternate, so will the market's next big move be up or down? No one knows, but given the long-term upward trend, the assumption is that the price will resume its upward trajectory after this correction.

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Trump in favor of crypto?

"A lot of people are very much for crypto," stated Trump during a brief speech last week. "And I'm fine with it. I want to make sure it's good and solid. If you like crypto, in any form... you better vote for Trump."

Trump, who as recently as 2019 declared himself not a fan of bitcoin and other cryptocurrencies, hasn't shared these words without purpose. His remarks are directed at his opponent, Biden and the behavior of Gary Gensler, the SEC chairman appointed by Biden who has been on the warpath for months. Gensler's latest move involves announcing a lawsuit against Robinhood, a familiar name even within traditional financial circles.

Thanks to the regulator, crypto gained a starring role in U.S. politics last week. The SEC is proposing to tighten the rules that banks must comply with if they want to hold crypto assets for customers. Were these rules to come into effect, it would make it difficult for banks to offer such a service on a large scale due to the heavy capital requirements involved. In response, the House of Representatives with its 21 Democrats approved a proposal on Wednesday that would overturn this controversial SEC directive.

The intervention of the U.S. House of Representatives caused a minor political storm that even reached Biden's office. The White House responded with a firm statement: "If the President were presented with it, he would veto it." Biden argues that otherwise "it could constrain the SEC's ability". Meanwhile, Biden's political opponents accuse him of attempting to enforce arbitrary regulations with clear political motivations.

All in all, it's clear that the presidential election campaigns have begun and that crypto has emerged as a vital tool.

AI tokens on the rise

While most tokens were down last week, AI-related assets were making waves. Over the past 7 days, the total market value of this category rose 16% to more than $30 billion. Key performers include RNDR, AGIX, and FET.

Analysts see two reasons behind this powerful upward trend.

First, they point to Nvidia's achievements. The chip manufacturer has become a symbol for all things related to artificial intelligence over the past year. On May 22, Nvidia will publish its latest quarterly figures and it seems the market is eagerly awaiting the results. This is also reflected in the company's stock, which rose to its highest level in a month last week.

In addition, there is talk of Cupertino, as one of the keynotes at Apple's iPad event showed Octane X, a software for creating animations and graphics. Behind the scenes, Octane X uses Render Network, a decentralized GPU network with its own token.

Can AI tokens maintain their momentum in the AI world for long? Hitesh Malviya, founder of DYOR, thinks so. "AI tokens will keep having cyclical runs [higher] as they are directly correlated with the whole AI-side development happening around us," he told CoinDesk.

In other news

• Number of Ethereum users at record level. The number of unique addresses interacting with Ethereum rose to nearly 7.8 million this week - the highest ever measured. That's over 180% more than a year earlier. Nearly three-quarters of this activity originated from a second layer, such as Arbitrum or Optimism.
• "Only" 10% of stablecoin transactions from real users according to a recently released report by Visa. In their analysis, they focused on "organic payment traffic," i.e. people using stablecoin as payment. Of the $2.2 trillion in transaction volume in April, a significant portion was attributed to bots and large-scale merchants, leaving $149 billion in genuine payment transactions.
• Bitcoin miners scale back operations after halving. Since late April, the total computing power they provide has dropped by nearly 10%. Analysts suggest this is a logical move due to the margin having shrunk significantly post halving. Miners are hoping for a repeat of previous cycles during which bitcoin's price rise more than compensated for previous losses.

In the latest episode of Satoshi Radio our hosts delve into crypto as a political issue in the US and the role of the regulator. Exactly what is the SEC's strategy? Our podcast hosts also look back on the latest news and provide a comprehensive market update.

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