Dogecoin (DOGE) Leads Careful Recovery
The price action of Dogecoin (DOGE) signaled there is still enthusiasm for altcoin speculations. DOGE regained some of its losses and settled around $0.18.
The chief reason for DOGE enthusiasm is a tweet by Elon Musk, tech king of Tesla. Musk said Tesla would accept DOGE for some of its merchandise. Musk is suspected to be one of the biggest Dogecoin “whales”, and the person behind an anonymous wallet building up a stash of millions over the course of the past two years.
DOGE has gone through hype cycles before, and remains a relatively volatile asset. Still, DOGE signals renewed interest in trading assets other than Bitcoin (BTC).
BTC Recovers Lost Ground
BTC dipped again to around $47,000 late on Tuesday. Later, the leading coin regained its positions and stood at $48,181.73.
The period of relatively low prices starts to look like accumulation, especially after recent signs of “whale” buying. MicroStrategy, one of the most dedicated BTC buyers, recently increased its holdings.
The short-term negative funding and unraveling of leveraged trading may be overcome with time, setting the stage for more significant price swings based on futures positions.
BTC remains in demand and is kept by miners, signaling little probability for significant spot selling. The most recent price shakedown may also be retreating, with hopeful signs of a new bullish trend in the coming weeks.
Another source of demand is the highly active Canadian ETF based on BTC prices, which is also adding spot coins in the past days.
Platform Coins Move Back for Action
After a few days of stagnation, some highly active assets are back in the game. The recovery affects platforms that are building the new trends in blockchain economies, including DeFi and gamified finance.
Polygon (MATIC) returned closer to the $2 range, adding more than 12% to its price overnight. Avalanche (AVAX) is back above $90 after adding more than 16% overnight. Both assets are highly concentrated on the Binance exchange, allowing for concerted trading and significant price moves.
Decentralized protocols are also quick to recover, with PancakeSwap (CAKE) jumping by 14.7% to $12.78.
Ethereum (ETH) moved slightly to the $3,800 range, giving a boost to the DeFi space and other connected tokens. The value locked in DeFi based on Ethereum is making a vertical recovery and is up to $97B.
Will ETH Lead the Recovery
Before the liquidations of December 3, ETH seemed more active than BTC and established itself at levels above 0.085 BTC. Now, there are renewed hopes for open interest in ETH, as well as spot buying. The ETH trading also showed a speedy recovery from the anomalous lows.
ETH continues to have multiple applications and to be locked in smart contracts, diminishing the selling pressures.
Ethereum Ecosystem Growing
The Ethereum ecosystem is not directly competing with new projects. ETH is in use for multiple startups, which still rely on the network for final verification.
The most widely used approaches include the creation of various forms of sidechains and bridges, to allow fast transactions without the need to pay gas fees.
The Ethereum ecosystem is now growing with more widely used gamified finance. The NFT space is also evolving to move into gaming, with some popular collections also becoming parts of decentralized games.
NFTs also show significant activity, with more than $2,900 average price per collectible item. Recently, a rare CryptoPunk sold for around $10.4M, while most rare punks see active trading around 50-60 ETH.
Is a Bear Market Still Coming
There are still attitudes that the cryptocurrency market and especially smaller altcoins are overpriced even at these levels.
In late 2021, the market is supported by more than 76.38B of Tether (USDT) in circulation, with no signs of funds flowing out. But for some, the rapid cycle of altcoin appreciation may have ended.
Outside of platform coins, there are multiple older digital assets that are mostly used for speculative trading. Even Cardano (ADA) at $1.26 is only making future promises for finally building its own DeFi ecosystem.
For some analysts, the market weakness in December signals a deeper potential bear market for all assets.
In 2021, the cryptocurrency space faced leaps of development and liquidity inflows. Now, the big question is whether the bull and bear cycles will repeat, or if price discovery will have other forms.
On the positive side, there is more interest in building value within the crypto economy, with more limited selling. At the same time, overheated assets still quickly erase around 50% of their value and underline the risky nature of altcoins.
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