5 reasons why the Aptos (APT) rally could still have wings

Aptos’ 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.

Let’s explore some of the fac­tors that could be pro­pelling the Aptos price rally.

A rich history and strong investor backing

Aptos is a byprod­uct of Facebook’s attempt with the Libra blockchain, which reg­u­la­tors forcibly shut down. Two of Libra’s lead­er­ship team mem­bers, Mo Shaikh and Avery Ching, lat­er found Aptos, a decen­tral­ized ver­sion of the aban­doned blockchain project.

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’ hope for a tech­no­log­i­cal break­through that could final­ly pro­vide a scal­able, secure, decen­tral­ized blockchain.

Aptos raised $350 mil­lion in 2022, which includ­ed 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.

FTX Ven­tures’ 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.

Steady ecosystem development

The Aptos blockchain was launched in Octo­ber 2022 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.

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.

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’s price is pri­mar­i­ly led by the supe­ri­or tech­nol­o­gy narrative.

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.

Mov­ing for­ward, the efforts of the busi­ness devel­op­ment team of Aptos and the per­for­mance of the blockchain will like­ly cat­alyze future price movements.

Traders’ disbelief could push APT price higher

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.

$COIN @ $12b mar­ket cap
Aptos @ $16b mar­ket cap 

wtf

— DavidHoffman.bedrock (@TrustlessState) Jan­u­ary 25, 2023

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. 

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

The sell pressure on APT is limited

APT’s 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.

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. 

Kimchi premium

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’ trad­ing vol­ume. The price of APT on Upbit is trad­ing around 1%–3% high­er than the mar­ket price, which indi­cates high demand in the region — hence, the same Kim­chi pre­mi­um.

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

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.

The views, thoughts and opin­ions expressed here are the authors’ alone and do not nec­es­sar­i­ly reflect or rep­re­sent the views and opin­ions of Cointelegraph. 

This arti­cle does not con­tain invest­ment advice or rec­om­men­da­tions. Every invest­ment and trad­ing move involves risk, and read­ers should con­duct their own research when mak­ing a decision.