The recovery of cryptocurrency markets began in early January with a rally in altcoins and Ethereum (ETH) liquid staking derivative (LSD) tokens, which were heavily listed due to the upcoming network upgrade in March. Gains were soon seen across the board as buyers began to catch up.
Improving macroeconomic conditions, including lower inflation and a stable US job sector, provided additional tailwinds for the positive rally. Bitcoin (BTC) is heading for its most impressive January close since 2013. Its price has gained 40% year-to-date from its opening value of $16,530.
Another major catalyst for the January 2023 rally was a short squeeze in the cryptocurrency market. Following the FTX debacle and the lack of bullish narratives for the niche, most investors expected growth to slow in 2023.
There are unresolved issues, such as the possible easing of geopolitical tensions between Russia and Ukraine and the risks of recession due to the aggressive quantitative easing policies of the Federal Reserve. Therefore, most traders did not expect strong price increases so early in the year.
It turns out that negative sentiment and the agglomeration of positions in the futures market continued to drive the gains. There is a high chance that a pullback will take place shortly after the sharp rises. It remains to be seen if the pullback levels are attractive enough for buyers to convert into a medium to longer-term uptrend. Let’s take a look at the top performing cryptocurrencies in January.
fit (APT)
Launched in October 2022, Aptos is a relatively new blockchain in the space that leverages technology from Facebook’s (now Meta) defunct project, Libra. It has significant face value based on its executive team, made up of former Meta engineers, who also built the Move programming language to make the chain scalable and decentralized.
Although the project enjoys a great reputation, its fundamentals do not justify the price. Disbelief among investors is part of the reason for the APT price rally. A $3 billion market cap for a four-month-old project has surprised many onlookers. There are also suspicions of market manipulation in the APT/KRW pair on Upbit, which has given rise to the Kimchi premium. It’s hard to pinpoint a specific factor driving its demand in South Korea.
APT/USD broke above its previous high of around $10, recorded around its launch. Technically, the token is in price discovery mode right now. Therefore, there are few selling resistance levels other than the $20 latest high and the $25 psychological level. Unless the positive catalysts of the negative funding rate for perpetual swaps and the Kimchi premium cool, the rally may still have potential.
The price momentum indicator, the Relative Strength Index (RSI), has reached oversold levels, suggesting the possibility of a reversal. The Moving Average Convergence Divergence (MACD) indicator shows a slight bullish deviation with a less pronounced rise in the metric compared to price. Still, the presence of buying volume is reassuring for APT bulls. Token support lies at $14.75 and $10.40.
Gala (GALA)
Like Aptos, Gala (GALA) also benefited from excess negative positions in the futures market. The rise in GALA/USD from $0.02 to $0.07 can be mainly attributed to the liquidation of short positions.
The token suffered a significant inflation of about 17,123,286 GALA per day, which means about USD 28.2 million per month at current prices. This raised fears that the recent price rise could be short-lived.
On January 25, the Gala team presented a new project roadmap in which they intend to update tokenomics to reduce inflation and introduce a new burn mechanism. They are working on a separate Gala chain, where GALA tokens will be used to pay transaction fees.
In addition, GALA’s daily broadcast may also be reduced after a vote is passed to change the time-based halving date to a supply-based one to bring the halving closer to July 2023.
The update announcements have increased buying pressure in GALA/USD, evident in a spike in buying volume. The token is trading above its 200-day exponential moving average at $0.052. If the buyers build support above this level, the price can rally towards the July 2022 breakout levels near $0.164.
Threshold(T)
Threshold was born from the merger of two projects, Keep Network and NuCypher, which have combined their technologies to build a decentralized bridge network. Threshold network node operators lock the platform’s native token, T and Ether, to validate transfers between Bitcoin and Ethereum. This technology is borrowed from the Keep Network, while NuCypher adds a privacy layer to the protocol.
In January, the project’s native token nearly tripled in price, benefiting from the release of version 2.0 and the advertisements from Coinbase. The improved version of the Threshold protocol will allow to mint tBTC (Bitcoin threshold) on Ethereum, which are backed by Bitcoin and pegged 1 to 1 to the BTC price.
The start of minting tBTC on Ethereum via the Threshold Network will likely increase the network’s total value locked, also known as TVL, making Threshold nodes more valuable. Initially, the project will launch a semi-decentralized version, Optimistic Minting, and gradually move to a decentralized system of nodes.
There is a significant market opportunity for Threshold following the dissolution of RenBTC. Wrapped Bitcoin (WBTC) currently has a commanding share of 93.6% of the total Bitcoin bridged to Ethereum.
Still, the recent 190% rise is beginning to show signs of a “buy the rumor, sell the news” event, especially given the Coinbase-led rally. Support for buyers lies at $0.027, with the next resistance level at $0.145.
Decentraland (MANA)
Metaverse-themed projects Decentraland (MANA) and The Sandbox (SAND) witnessed a renaissance of VR storytelling, as Apple was rumored to launch its VR headset collection in spring 2023. More recently, The Decentraland team released their manifesto for the current year, highlighting the focus on growing their community of developers and creators.
Although Decentraland is one of the first metaverse projects with a great opportunity to capture the future Web3 market, the current rally is showing signs of overbought in the near term.
The RSI indicator shows a reading above its bullish resistance. The MACD indicator shows divergence with little to no change in the metric to complement the January 28 rally of 16.5%.
However, the break above the 200 SMA and the resistance of the FTX breakout levels at 0.70 are encouraging for technical buyers. It remains to be seen if the rally has been a mere hunt for short orders or if it is due to actual demand. Support for the token is found at the 50-day EMA, currently at $0.54, and at the 2022 lows at $0.27.
Solana (SUN)
Solana (SOL) benefited from excessively negative sentiment around the future of the blockchain. The price rally was a classic case of shorting in the futures market. While the fundamentals pointed towards a death spiral in its price, the market played in favor of the sellers. Taking advantage of the low liquidity conditions, buyers were able to push prices up until there were few sellers left.
Market maker and venture capital firm Alameda Research was the main source of liquidity for Solana’s DeFi projects. He was also one of the biggest backers of his ecosystem projects. The DeFi community will face significant challenges within Solana due to a lack of liquidity.
Solana developers and the foundation have worked hard to make the network stable and more decentralized. Although the network was stable during the FTX debacle, it seems to have lost market confidence due to frequent crashes. In addition, Alameda/FTX owns around 10.7% of SOL’s total supply, which will likely increase selling pressure in the coming years.
Its NFT space, while ranked second in terms of trade volume across blockchains, is starting to see the exit of major players like DeGods, y00ts, and most recently F Studio. Whether the community can grow again remains to be seen. The task will be difficult without the support of his most prolific patrons.
In longer terms, the $30 level is a crucial support and resistance level for the SOL/USD pair. If buyers consolidate above this level, the positive momentum in the token price will likely extend into the first quarter of 2023. However, as the rally is primarily driven by a liquidation of short positions in the futures market , there is a higher probability of a significant correction, followed by a period of accumulation, until a significant run can take shape.
Last but not least, LSD native tokens deserve a mention in the list of monthly winners. Native tokens on Ethereum’s LSD platforms nearly doubled in price across the board thanks to the upcoming Shanghai update.
The Frax DAO was the top gainer among LSD tokens, benefiting from a sharp increase in Ether locked on its platform. The platform is capable of attracting liquidity by providing additional returns when staking ETH by leveraging your position on Curve Finance.
Frax DAO is the largest owner of CVX tokens, giving them priority control over Curve issuances. Currently, locking frxETH in Curve yields around 9-10% annual return, which is twice the average DAO return of around 4%.
With the Shanghai Ethereum upgrade still a month away and room for growth in LSD platforms, the focus on LSD tokens could stay until February.
The views, thoughts and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. All investing and trading involves risk, so readers should do their own research before making a decision.