{"id":18715,"date":"2023-01-27T19:44:55","date_gmt":"2023-01-28T03:44:55","guid":{"rendered":"https:\/\/coinnetworknews.com\/5-reasons-why-the-aptos-apt-rally-could-still-have-wings\/"},"modified":"2023-01-27T19:44:55","modified_gmt":"2023-01-28T03:44:55","slug":"5-reasons-why-the-aptos-apt-rally-could-still-have-wings","status":"publish","type":"post","link":"https:\/\/coinnetworknews.com\/5-reasons-why-the-aptos-apt-rally-could-still-have-wings\/","title":{"rendered":"5 reasons why the Aptos (APT) rally could still have wings"},"content":{"rendered":"
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Aptos\u2019 APT reached a new all-time high of $20.39 after posting gains exceeding 400% since the start of 2023. While the rally could just be a pump-and-dump event due to the perception of weak fundamentals, increasing negative sentiment toward the token will likely fuel the prices in the short term.<\/p>\n

Let\u2019s explore some of the factors that could be propelling the Aptos price rally.<\/p>\n

A rich history and strong investor backing<\/h2>\n

Aptos is a byproduct of Facebook\u2019s attempt with the Libra blockchain, which regulators forcibly shut down. Two of Libra\u2019s leadership team members, Mo Shaikh and Avery Ching, later found Aptos, a decentralized version of the abandoned blockchain project.<\/p>\n

The project is based on the Move programming language and introduces a new class of layer-1 blockchains that will compete against the likes of Solana and Cardano. The primary reasons behind the tailwinds for the APT token include investors\u2019 hope for a technological breakthrough that could finally provide a scalable, secure, decentralized blockchain.<\/p>\n

Aptos raised $350 million in 2022, which included a $200 million seed round led by Andreessen Horowitz and a $150 million Series A funding<\/a> round led by FTX Ventures and Jump Crypto. Later, Binance made a follow-on strategic investment to help boost<\/a> the Aptos ecosystem.<\/p>\n

FTX Ventures\u2019 prominence induces the risk of a sell-off from the defunct entity. In this regard, some investors might be reassured by the involvement of other venture capitalists like Multicoin Capital, Blocktower Capital and Coinbase Ventures. High-volume exchanges like Binance could also soften the blow dealt by FTX and Alameda Researc.<\/p>\n

Steady ecosystem development<\/h2>\n

The Aptos blockchain was launched in October 2022<\/a> and is still in the nascent stages of ecosystem development. There are few decentralized finance or nonfungible token projects on the blockchain, and smart contract activity is currently limited. More than 94% of the blockchain transactions are for APT transfers, showing negligible decentralized application activity.<\/p>\n

Aptos transaction volume by purpose of transactions. Source: Pinehearst<\/a><\/figcaption><\/figure>\n

Development activity has been around average on the blockchain. The number of active developers on Aptos is more than Avalanche and Tezos but behind Solana, Polkadot, Cardano and Ethereum.<\/p>\n

\"\"
Number of active developers working on blockchains and dApps. Source: token terminal<\/figcaption><\/figure>\n

Aptos is not the first project to build a hefty market capitalization without significant on-chain activity. Cardano and Polkadot are prominent examples, where the rise in their native token\u2019s price is primarily led by the superior technology narrative.<\/p>\n

However, even in this respect, the total size of the Aptos community is smaller than top layer-1 projects. Cardano and Polkadot have more than 1.3 million Twitter followers on their accounts. At the same time, Avalanche has over 855,600 followers, and Tezos has more than 470,000. Aptos is lagging behind, with a 364,500 follower count.<\/p>\n

Moving forward, the efforts of the business development team of Aptos and the performance of the blockchain will likely catalyze future price movements.<\/p>\n

Traders\u2019 disbelief could push APT price higher<\/h2>\n

Given the lack of activity and limited ecosystem growth, the rally in APT has taken the market by surprise. It is not difficult to find tweets hinting at the overblown market capitalization of the token.<\/p>\n

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$COIN<\/a> @ $12b market cap
Aptos @ $16b market cap <\/p>\n

wtf<\/p>\n

\u2014 DavidHoffman.bedrock (@TrustlessState) January 25, 2023<\/a><\/p><\/blockquote>\n

However, going against the trend can be risky for sellers. The short-side trade for APT perpetual swaps is getting crowded, as the token has surpassed its October 2022 peak of around $15, which is evident in the negative funding rate for APT. <\/p>\n

Funding rate for APT perpetual swaps. Source: Coinglass<\/a><\/figcaption><\/figure>\n

It provides an opportunity for buyers to hunt sellers\u2019 liquidation levels by pushing the price up. And in crypto markets, the short squeeze of short orders is realized more often than not.<\/p>\n

The sell pressure on APT is limited<\/h2>\n

APT\u2019s tokenomics limits the selling pressure on the token for the first year from its launch in October 2022. The release schedule of APT delays investor unlocks until October 2023, after which there will be a steep rise in the circulating supply of APT tokens. Until the unlock begins, the only source of inflation is from staking rewards, which is 7% for staked tokens.<\/p>\n

Initially, the foundation distributed 2% of the supply to early users and developers. In all probability, users who wanted to sell their APT would have already sold in the three months since its launch. <\/p>\n

Kimchi premium<\/h2>\n

Significant buying interest for APT is coming from the South Korean won trading pair on the UpBit crypto exchange. The exchange constitutes nearly 40% of Aptos\u2019 trading volume. The price of APT on Upbit is trading around 1%\u20133% higher than the market price, which indicates high demand in the region \u2014 hence, the same Kimchi premium<\/a>.<\/p>\n

Aptos spot trading data. Source: Coingecko<\/figcaption><\/figure>\n

There’s a chance that the volumes of Upbit are inflated from wash trading<\/a>, or it could be an attempt to manipulate the markets. The exchange’s owners have come under the purview of regulators<\/a> many times in the past. Nevertheless, the buying pressure will likely persist until the Kimchi premium resolves.<\/p>\n

While the prices may have started due to a broader positive trend in cryptocurrency prices, it’s taking the shape of a disbelief rally by proving sellers wrong. Until the negative sentiment and Kimchi premium dissolve, the chances of Aptos moving higher are considerable.<\/p>\n