Bitvavo Market News - Weak crypto market hits altcoins the hardest
The recovery in the crypto market after the blow on August 5 has not continued. The price of bitcoin remains stuck around ā¬53,000, a good 20% below March's record. The rest of the crypto market is having an even harder time. Bitcoin's dominance rose to its highest point since spring 2021.
Market update
Last week we reported on the meteoric decline of Monday, August 5, when the price of Bitcoin fell by 25% in three days to the lowest point of this correction at ā¬45,000. We also described the impressive recovery in the following days. That recovery, however, has not continued.
Between ā¬56,000 and ā¬58,000, important dividing lines converge. The 50-day average and the 200-day average lie there. They guide short- and medium-term trends. Below is bearish, above is bullish. We are below, and there is still a lot of work to be done to break through.
In the graph below we have divided the prices of the past 9 months into three zones. On the right is a volume profile. This is a histogram of the trading volume at a certain price. Above (1) and below (3) we have two zones in which a lot of trading has taken place. We can expect a lot of trading there again. Between ā¬42,000 and ā¬52,000 there is mainly empty space (2), that's where things can go fast.
That is an argument for expecting increased volatility in the coming weeks. It might be driven by macroeconomic data in the U.S. or Japan or speeches by central bankers at the annual conference in Wyoming. It could even be amplified by somewhat lower liquidity in the market over the summer period.
Looking at the seasonality in the crypto market, we can expect another clear trend in the fourth quarter. In the majority of years, it is upward. We are curious to see how that plays out for crypto market ratios. So far, bitcoin in particular has been the big winner.
The chart below shows bitcoin's dominance. That is the share of the market that is occupied by bitcoin. We have filtered out the largest stablecoins. Over the past three years, dominance has increased from 40% to 60%. Altcoins have lost a lot compared to bitcoin.
Could the breakout above 60% be an announcement of more weakness for altcoins? Or is the rise above 60% a temporary aberration, and will dominance fall out of this structure later this year? Only then would we be talking about an "alt season", just like in 2021. Until then, bitcoin will continue to lead the way.
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The rise and fall of AI tokens
Believe it or not, just over two years ago investors had little to say about Nvidia. In fact, outside the tech sector, few people had heard of the company. By 2022, its share value was down nearly 65%.
That changed rapidly in 2023. More and more investors saw the development of artificial intelligence gain momentum, driven byĀ Microsoft's billion-dollar investment in OpenAI. For them, Nvidia was a proxy for exposure to this promising sector.
In June of this year, Nvidia became the most valuable company in the world, with a market cap of $3.335 billion. And Nvidia CEO Jensen Huang? Heās achieved pop star status. Even his companyās developer days now draw stadiums full of people.
Nvidia's total market value increased 1,000% in four years to over $3 trillion
Nvidiaās high-profile success provided the perfect breeding ground for the rise of AI tokens. Everyone was bullish, and indeed, the prices of old and new names soared. Bittensor (TAO), Internet Computer (ICP), Render (RENDER), and The Graph (GRT) ā to name a few ā posted impressive results, with gains of hundreds of percent.
In the third quarter, the resulting enthusiasm lost momentum. Nvidia shares fell nearly 30% from their peak. AI tokens did the same, but with losses twice as big. Since early August, however, Nvidia has been making a major recovery with a 25% increase in value. For AI tokens, things look less rosy. The price drop continues, with many seeing a drop in valueĀ the past 30 days between 30 and 40%.
Was the AI rally in crypto a one-off ride on the mainstream success of AI? This is the question traders are now left with. What will remain once the effect of that narrative has faded?
Users of AI applications do not need tokens. Those use their favorite chatbot like they use Google or any other search engine. They ask their question and get back to what they were doing. Indeed, at this point, requiring a token would probably create an unworkable barrier for them.
The reality is that the intersection between crypto and AI has yet to develop and prove itself. Included in that overlap are mostly infrastructure projects. These try, for example, to put unused GPU capital to work, get AI developers to work together smartly, provoke competition between different models, and fairly reward parties who provide data to those models. Behind the often catchy names of AI projects is real innovation.
But will speculators delve into the subject in this way? They are more likely to follow the next narrative that pops up. In this context, AI is certainly not passƩ, but is probably more specific. Instead of an all-encompassing category success, specific winners and losers are likely to emerge, just as happens in other categories.
In other news
Dubai court approves crypto currency for salary payments.Ā According to lawyersĀ the court underlines that the emirate has become more receptive to using cryptocurrency for everyday business. They see it as a "progressive approach" and "a step forwardā in the UAEās ambition to become a leader in the digital economy. Several other jurisdictions are still vying for that lead, including Hong Kong, South Korea, and Singapore.
South Korea's national pension fund investing in bitcoin. In the second quarter of the year, it boughtĀ nearly $34 million in shares of MicroStrategy (MSTR), which is seen as a proxy for bitcoin exposure. South Korea's National Pension Service is one of the largest pension funds in the world. Founded in 1988, it manages the pensions of millions of South Koreans.
Pump.fun revenue surpasses that of Ethereum and Solana. On August 14, the memecoin platform single-handedly generatedĀ more income than the fourteen other protocols that made up the top fifteen. In total, the platform has earned its creators more than $100 million since its launch. Competitors will undoubtedly spring up in the coming weeks and months.
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