Aptos (APT) hit a new all-time high of $20.39 after posting gains of over 400% since early 2023. While the rally could just be a pump-and-dump event on perceived weak fundamentals, adding to the Negative sentiment towards the token will likely drive prices up in the near term.
Let’s explore some of the factors that could be driving the Aptos price rally.
A rich history and strong investor backing
Aptos is a byproduct of Facebook’s attempt at the Libra blockchain, which was forcibly shut down by regulators. Two of Libra’s leadership team, Mo Shaikh and Avery Ching, later found Aptos, a decentralized version of the abandoned blockchain project.
The Move programming language-based project introduces a new class of Layer 1 blockchains that will compete with Solana and Cardano. The hope of investors for a technological breakthrough, Aptos that could finally provide a scalable, secure and decentralized blockchain, are primarily responsible for creating tailwinds for the token.
Aptos raised $350 million in 2022, including a $200 million seed round led by Andreessen Horowitz and a $150 million Series A funding round led by FTX Ventures and Jump Crypto. Later, Binance made a follow-on strategic investment to help boost the Aptos ecosystem.
The fact that the FTX companies are prominent investors induces the risk of a liquidation of the defunct entity. In this sense, some investors could take comfort in the participation of other venture capitalists such as Multicoin Capital, Blocktower Capital and Coinbase Ventures. High volume exchanges like Binance could also soften the blow inflicted by FTX/Alameda.
Constant development of the ecosystem
The Aptos blockchain was launched in October 2022 and is still in the early stages of ecosystem development. There are not many DeFi and NFT projects on the blockchain and smart contract activity is currently limited. More than 94% of blockchain transactions are for APT transfers, which shows negligible dApp activity.
Development activity has been around average on the blockchain. The number of active developers on Aptos is higher than Avalanche and Tezos, but behind Solana, Polkadot, Cardano, and Ethereum.
Aptos is not the first token to build a large market capitalization without significant on-chain activity. Cardano and Polkadot are prominent examples, where the rise in the price of their native token is primarily led by the superior technology narrative.
However, even in this regard, the overall size of the Aptos community is smaller than the major Tier 1 projects. Cardano and Polkadot have more than 1.3 million Twitter followers on their account. At the same time, Avalanche has more than 855,600 followers and Tezos has more than 470,000. Aptos is lagging behind with 364,500 followers.
Going forward, the efforts of Aptos’ business development team and the performance of the blockchain will likely catalyze further price movements.
Trader disbelief could push APT price higher
Given the lack of activity and limited growth in the ecosystem, the rally in APT has taken the market by storm. It’s not hard to find tweets hinting at the token’s exaggerated market capitalization.
USDCOIN @ USD12b market cap
Aptos @ USD16b market capwtf
— DavidHoffman.bedrock (@TrustlessState) January 25, 2023
However, going against the trend can be risky for sellers. The short sideways trade for APT perpetual swaps is filling up as the token passed its October 2022 peak of around $15, which is evident in the negative funding rate for APT.
It provides an opportunity for buyers to seek the seller’s clearance levels by raising the price. And in the crypto markets, the reduction of short orders is done most of the time.
Selling pressure on APT is limited
The economics of the Aptos token have limited the selling pressure on the token for the first year since its launch in October 2022. The APT launch schedule delays the unlocking of investors until October 2023, at which time there will be a sharp increase in the circulating supply of APT tokens. Until the unlock begins, the only source of inflation is the rewards staked, which is 7% for the tokens staked.
Initially, the foundation distributed 2% of the supply to early adopters and developers. In all likelihood, users who wanted to sell their APT would have already sold three months after it was released.
Significant buying interest for APT comes from the South Korean won trading pair, APT/KRW, on crypto exchange UpBit. The exchange makes up nearly 40% of Aptos’ trading volume. The APT price on Upbit is trading 1-3% higher than the market price, indicating high demand in the region; hence the same cousin of Kimchi.
There is a possibility that Upbit volumes are inflated by wash trading, or it could be an attempt to manipulate the markets. Exchange holders have been under the control of regulators many times in the past. However, the buying pressure will likely persist until the Kimchi premium is resolved.
While the prices may have started due to a broader positive trend in cryptocurrency prices, it is taking the form of a rally of disbelief as the sellers are proven wrong. Until the negative sentiment and Kimchi premium dissolve, the chances for Aptos to rise are considerable.
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