Bankless: Why did Aptos soar 6 times in a month?

特邀专栏作者

2023-02-01 12:30 (UTC+8)

This article is about 1993 words, reading the full article takes about 3 minutes

The Aptos ecosystem does not have outstanding Dapps, and the TVL cannot keep up with the market value. Why can APT rise by 600% in one month?

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The Aptos ecosystem does not have outstanding Dapps, and the TVL cannot keep up with the market value. Why can APT rise by 600% in one month?

Original author:Ben Giove

Compilation of the original text: The Way of DeFi

Original author:

Not every pumb has a pattern or reason. That being said, it’s hard to ignore the January growth of APT, the token associated with venture capital (VC) darling blockchain startup Aptos Labs.

Let's take a closer look at this pumb and try to answer whether we should salivate at this opportunity or dismiss it.

What's up with Aptos?

Aptos skyrocketed 6 times in a month, is it just an empty game?

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Aptos co-founder and CEO Mo Shaikh - Image credit: YouTube

During every cryptocurrency rally, whether at the peak of a bull market or in the throes of a bear market, we ask ourselves the same question: Why is a project whose fundamentals look questionable skyrocketing?

In many cases, this is a valid question. While crypto asset analysis has matured considerably over the past few years, several of the largest coins by market capitalization are still pegged to projects with limited usage.

Aptos skyrocketed 6 times in a month, is it just an empty game?

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1 month of APT/USDT - Source: TradingView

Which brings us back to the never-ending question, why is this project with seemingly questionable fundamentals skyrocketing?

Let's explore and see if we can find out.

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History of Aptos

Aptos is an L1 developed by a former engineer for Facebook's Diem project. The main value proposition of the network is scalability, claiming to be able to handle 10,000 TPS while aiming to reach 100,000 TPS. Aptos also uses the Move programming language, which has been praised by developers for its security features and ease of use.

Launched in October 2022, Aptos was valued at $13 billion on the day it went live.

Aptos skyrocketed 6 times in a month, is it just an empty game?

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The market plummeted after the FTX crash, but APT and other “Sam coins” were hit harder, falling 55.9% between Nov. 7 and Dec. 29. Its December low of $3.08 valued the network's FDV at about $3.1 billion, down from its most recent funding round.

Sentiment is gloomy across the market, and APT in particular is radiant given its limited usage and the threat of prolonged selling pressure from the bankruptcy of its largest investor.

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The Mother of All Short Squeezes

The short sellers smelled blood and started pouring in without any surprise. In the weeks following the FTX and Alameda debacles, APTs’ annualized funding rates sometimes hit negative triple digits. This means that the demand for shorting APT is so great that traders are actually willing to pay triple-digit annualized interest for it.

Since January 8, the price of APT has skyrocketed 368% from $3.88 to $18.16. The gut-wrenching rally left "a pile of short corpses" in its wake, with $112 million in short positions liquidated during the period, compared with $63.9 million in long positions.

Aptos skyrocketed 6 times in a month, is it just an empty game?

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APT Liquidations - Source: Coinglass

We can see from these numbers above that Aptos has a lot of fuel in an illiquid market that is still affected by FTX. And the bears seem to be opting to counter the move by shorting heavily, complicating the situation as APT funding has once again dipped into extreme negative territory, with an annualized yield low of -136% on Jan. 25.

Aptos skyrocketed 6 times in a month, is it just an empty game?

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It's probably not just Aptos bears getting blown away by this gigantic Pumb. It is conceivable that Aptos' own investors may also be among the victims, as those looking to hedge their paper profits may have shorted APT perps. Considering the opacity of CEX, we are only speculating here.

With APT investors not able to start unlocking until October 2023, the token also benefits from having no structural sellers to drive down the price. If January's performance is any indication, it also means that any VCs using APT perps for their hedges face a long and dangerous road ahead.

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what happens next

As we've seen, there's a simple and sound reason why APT saw huge volatility at the start of the year: it experienced a good old-fashioned short squeeze.

In the short term, positioning and market structure override fundamentals. APT is so oversold that traders sometimes pay triple-digit annualized amounts to short it. The unwinding of these bearish bets created sharp price action, but up rather than down, as we have become accustomed to over the past year-plus.

So far, we haven't seen much evidence that this is happening, although there are some encouraging signs. While monthly active addresses are down slightly in January 2023 compared to December 2022, both transaction volume and market capitalization of stablecoins on the network are expected to increase slightly.