Weekly Crypto Analysis: Bitcoin and Ethereum Lose 6%; Charts Suggest Further Downside
Things worsened on Friday when the U.S. Commerce Department released a report stating that the personal consumption expenditures (PCE) price index climbed by an unexpectedly high 5.4% in January. This was a major blow to BTC and ETH, causing the two largest cryptocurrencies by market capitalization to plunge. The PCE price index is the U.S. Federal Reserve’s favored inflation gauge.
BTC reached a low point of $23,000 on Friday, the lowest it has been in nine days. ETH was down by over 1% in the past 24 hours, indicating that the decline could continue.
Meanwhile, Polygon (MATIC) suffered one of the biggest dips of the week, shedding a whopping 16.7% to trade at $1.21 at the time of writing. This downward spiral began on Tuesday when Polygon Labs announced that they would be laying off 100 employees, which equates to 20% of their workforce.
Things got worse for Polygon when false rumors began to spread that the blockchain had been down for two hours. Polygon later revealed that a few nodes on the network temporarily went out of sync, causing the outage of an independent chain explorer called Polygonscan.
Crypto Market Heatmap | Source: Coin360
Top Altcoin Gainers and Losers
Top Altcoin Gainers
Stacks (STX) ➠ +94.58%
ANKR Network (ANKR) ➠ +27.16%
SSV Network (SSV) ➠ -22.73%
Top Altcoin Losers
Filecoin (FIL) ➠ -21.9%
Internet Computer (ICP) ➠ -20.50%
Curve (CRV) ➠ -18.4%
Fear and Greed Index at 53, Market In Neutral Territory
As expected, Bitcoin tapped the $22,800 mark this past week, but bears were run out of the market as it quickly went back up. The Fear and Greed index remained slightly skewed at 53, and the new week will be pivotal for the next definite movement of Bitcoin.
Crypto Fear and Greed Index | Source: Alternative
This Week’s Crypto News Highlights
Crypto Should Not Be Given Official Currency, Legal Tender Status – IMF
According to a paper titled "Elements of Effective Policies for Crypto Assets," published on Feb. 23, the International Monetary Fund (IMF) cautioned against granting cryptocurrencies legal tender or official currency status, warning of potential adverse effects on a nation's monetary sovereignty and stability.
The IMF emphasized that such a move could lead to financial instability due to increased adoption and exposure of traditional financial institutions to these volatile assets, thereby heightening their risk profiles.
If a state decides to grant a cryptocurrency legal tender or official currency status, the government should limit its use for official payments and avoid guaranteeing crypto-to-fiat conversions to safeguard against volatility issues, according to the IMF.
The IMF also advised that creating credible domestic institutions and policies is the first line of defense in ensuring a nation's monetary stability. Weaknesses in these areas often lead to people converting their fiat for foreign currencies, and the advent of cryptocurrencies has exacerbated this issue as people convert untrusted fiat into crypto more often than other fiat currencies such as the dollar or euro.
The IMF suggests that building stronger institutions and creating solid policies to enhance trust in the traditional system is the best way to reduce the substitution of fiat for crypto assets. The first step in ensuring credibility is to establish a solid Monetary Policy Framework (MPF), which should be transparent, coherent, and consistent to ensure that the public understands the policies and their impact.
The IMF believes that creating a robust MPF will help anchor market expectations, curb currency substitution, and ensure the effectiveness of the monetary policy.
Colombia’s Legal System Experiments In The Metaverse
A recent report states that Colombia's Magdalena Administrative Court held its first-ever legal trial in the metaverse, with the presiding magistrate stating that it felt more authentic than a video call. The trial, which took place on Feb. 15, involved participants in a traffic dispute and lasted for two hours. The regional transport union had brought the case against the police, and it will progress "partly" in the metaverse.
The verdict could also be delivered in the virtual world. During the trial, the participants appeared as avatars in a virtual courtroom, with Magistrate Maria Quinones Triana wearing black legal robes. Colombia is among the first nations in the world to experiment with legal proceedings in the metaverse.
According to a Jan. 16 survey published by CoinWire, 69% of respondents believe that the metaverse will eventually alter social lifestyles by introducing new approaches to entertainment and activities.
French Police Arrest 2 People In Connection To Platypus Attack
French police have apprehended two suspects related to the recent Platypus exploit, a cryptocurrency heist totaling $9.1 million. The authorities seized around $222,000 worth of digital assets, as reported by local sources.
Platypus, the decentralized protocol that suffered the attack, collaborated with on-chain investigator ZachXBT and popular crypto exchange Binance to aid the investigation leading to the arrest.
The thief behind the attack used the flash loan technique to exploit a solvency flaw in the Platypus USD (USP) stablecoin's mechanism, which resulted in the theft of multiple stablecoins and other digital assets. The first attack alone resulted in the theft of $8.5 million in assets, followed by two additional attacks that stole roughly $380,000 and $287,000.
The attacks also depegged the Platypus USD stablecoin from the United States dollar, leading to an uproar in the crypto community. Mango Markets exploiter Avi Eisenberg, who manipulated Mango (MNGO) prices using the same flash attack technique in October 2022, faced similar charges and was arrested on fraud charges in December 2022.
Platypus has since come up with a plan to reimburse affected users, with 63% of the main pool funds expected to be returned within six months. Furthermore, the frozen stablecoins could be reminted, potentially recovering 78% of the funds, should Aave approve the proposal and Tether confirm reminting the frozen USDT.
FTX Japan Allows Total Withdrawal of Funds — Users Rejoice
FTX Japan, the Japanese subsidiary of the cryptocurrency derivatives exchange FTX, has announced that it will allow its users to withdraw all of their funds from the platform, a move that has been met with widespread relief and celebration from users.
This decision comes after almost four months of uncertainty and anxiety surrounding the future of the cryptocurrency exchange in Japan; after Changpeng Zhao, the CEO of Binance announced the crypto exchange would liquidate its substantial holdings of FTX token.
FTX Japan's decision to allow the total withdrawal of funds from February 21 is a significant milestone for its Japanese users. Many had been worried that their investments would be stuck on the platform indefinitely, as other subsidiaries still have their funds hanging without any hope of getting them back.
Coinbase Launches Ethereum-Based Layer2 Network
Coinbase has surprised the industry by revealing the testnet launch of Base — its brand new layer2 scaling solution based on Optimism. This made Coinbase, which has traded on Nasdaq under the $COIN ticker since April 2021, the first publicly-traded company to launch a layer2 blockchain solution.
As a result of the announcement, the price of Optimism (OP) spiked to a high of $3.13. Additionally, Cathie Wood’s Ark Invest purchased 63,585 Coinbase shares after Coinbase released its largely positive Q4 financial statements and its new Base network.
The stock price of $COIN spiked 2% on the day — marking a significant stock price gain.
Bitcoin (BTC/USDT) Technical Analysis
Bitcoin is, moving in a downward range with resistance at $24,000 and support at $22,800. The cryptocurrency is seen as fundamentally weak as the chart is below the 200MA, signaling further room for a downturn. There is also a bearish RSI divergence, and this does not look good for Bitcoin bulls.
The key point to watch for the cryptocurrency is the $22,800 support. If Bitcoin loses it, the next stop will most likely be near the $21,500 mark.
BTC/USDT Chart on the Daily Timeframe | KuCoin
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