Bitvavo Market News - Bitcoin reacts positively to US Central Bank

After a period of indecision, the crypto market suddenly rebounded late last week. The price of Bitcoin has recently surpassed several resistance levels it had encountered multiple times in recent weeks. Does this signal the start of a clear upward trend? And what implications does this surge have for altcoins? More on this in this edition of Bitvavo Market News.

Market update

Last week, the crypto market saw positive gains. The price of bitcoin rose 8% from €53,000 to €57,000. Most of this rise occurred on Friday, Aug. 23, and appears to be a reaction to a speech by Jerome Powell, Chairman of the U.S. Federal Reserve, who suggested that the time may be right for interest rate cuts.

With this increase, the price is climbing above some important divides. To understand this, we need to look at dollar rates as the euro-to-dollar ratio has been trending upwards significantly in recent weeks, and the crypto market is now predominantly valued in dollars.

The 50-day and 200-day averages lie in the region between $61,000 and $64,000, as well as the average purchase price for recent investors. The price struggled to break through this range over the past two weeks, with six unsuccessful attempts documented in the chart below. However, success was achieved on Friday, with both the daily and weekly closes above $64,000.

After such an uphill battle, it would not be unusual for the market to want to test whether this earlier resistance has now turned into support before potentially continuing the upward trend. The price's reaction to testing the 50-day average is important. Will we see a quick recovery? If so, it will likely indicate that we are heading toward the upper boundary of this correction phase, around $69,000 or €64,000.

Like bitcoin, the total market value of all altcoins rose by 8%, but this average masks significant variation. Smaller altcoins, in particular, did extremely well. Here and there we saw increases of tens of percent. On average, altcoins outside the top 10 have experienced a 13% gain.

Larger altcoins lagged behind, with notable attention on Ether's underperformance, the Ethereum network currency. Following the launch of ether ETFs, many had expected above-average performance. BNB, XRP and TON have also performed worse than bitcoin over the past seven days. Overall, the top 10 altcoins came in at an average 5% gain.

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A DeFi renaissance?

In our market updates, you often see that while Bitcoin strengthens, altcoins as a category sometimes struggle. This recurring pattern, where Bitcoin advances while altcoins lag, appears to be a form of natural selection, with only the strongest altcoins enduring.

It was precisely in this turbulence that a standout player emerged: Aave. Aave is a decentralized finance (DeFi) protocol that allows users to borrow and lend without central intermediaries. It is one of the leading names in the DeFi world and has performed remarkably well recently. While many altcoins have declined in value, Aave actually seems to be making a significant upward move.

So, what is driving this growth? According to analytics firm Kaito, there are several factors at play. For example, new proposals within the Aave ecosystem offer additional rewards to token owners. Aave has also seen peaks in both the number of borrowers and total deposits. During market downturns, the protocol has gained significantly from liquidation fees. In addition, Aave is positioning itself as the market leader on several networks, bolstering confidence in the currency.

Some speculate that the success of Aave is the harbinger of a broader revival of DeFi. Recently, DeFi has been pushed somewhat into the background by hypes surrounding AI tokens and memecoins, but interest seems to be returning. The growing attention to DeFi, also called "mindshare," indicates a renewed focus. If DeFi is indeed on the rise again, it could also boost the broader altcoin market. But we should be wary of jumping to conclusions. The market remains volatile, and while the outlook seems positive, we have yet to see if this translates into concrete results. 

Solana ETFs on hold

Following the success of U.S. bitcoin and ether funds, traders and fund managers are hoping to expand the crypto market with the first spot Solana ETF. Applications are being submitted by two interested parties: an exchange and a fund manager.

There are two fund managers in the running, both using the same exchange (Cboe). However, they received some bad news this week. According to sources at The Block the SEC has rejected the exchange's applications. Why? The regulator considers SOL a security, a stance it has previously maintained in several lawsuits.

Despite this setback, the race is not quite over. The fund managers, 21Shares and VanEck, are requesting the SEC to comment explicitly on their applications. However, given the SEC’s firm stance on Solana, the likelihood of gaining new insights appears slim. Still, optimists remain hopeful that there is still room for adjustments or new arguments that could win over the regulator.

In other news

• Sony launching its own Layer 2 network, Soneium. On Friday, the company announced the project in a press release. Soneium runs on top of Ethereum and is intended to be an "infrastructure that everyone can use on a daily basis." Sony plans to develop new services that integrate with existing Sony products, such as Sony Bank, Sony Music and Sony Pictures. It is unclear exactly what the plans are, but expectations are high.

• El Salvador continues to collect bitcoins. Most central banks have been particularly interested in physical gold in recent months. But the Salvadoran government is seeking refuge in the digital variety, having purchased, since March 16, 1 BTC every day. In total, El Salvador now has 5854 BTC on its balance sheet. In dollar terms, the bitcoin pot has remained almost the same size since its creation.

• Bitcoin fees skyrocketed by launch Babylon. Babylon is a Cosmos-based strike protocol that allows users to monetize bitcoins. On Aug. 22, Babylon opened its doors for the first time. Users could deposit up to 0.05 BTC per transaction into a pot of a ceiling of 1000 BTC. Transaction fees on the bitcoin network temporarily increased 10 times. On average, nearly $8 was paid per transaction.

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