What has caused the recent Aptos price rally?

The price of Aptos, APT, hit a new record high of $20.39 following a rise of over 400% since the beginning of 2023. Although some might see the surge as a temporary phenomenon driven by the impression of poor underlying conditions, the negative outlook surrounding the token is expected to drive prices higher in the short term.

Aptos was launched in October 2022 with a mix of excitement and criticism, and it now has a market capitalization of approximately $2 billion, making it the 35th most valuable cryptocurrency network in the industry.
However, APT's association with FTX caused its first price drop, as FTT and APT, both influenced by FTX, took the entire market down with them. As a result, FTT plummeted from $8 to $3.9 in just two weeks.
Despite the setback, the entire crypto market, including APT, has begun to recover in the last 30 days, with APT reaching a new all-time high.

The recent rise in Aptos price started two weeks ago when the well-known decentralized exchange PancakeSwap held a vote among its community to keep using the Aptos blockchain.

PancakeSwap is currently the leading DEX on the Aptos blockchain with 58.5% dominance and $32.2 million in total value locked. According to DefiLlama, the current total value locked in Aptos is estimated to be $55.1 million.

The price of ATP tokens also gained from its integration with
Atomic Wallet, a non-custodial multi-chain cryptocurrency wallet, as well as from the growing interest in NFT collections built on the Aptos platform.

Let's examine the factors contributing to the increase in Aptos price.

1. A rich history and strong investor support

Aptos originated from Facebook's attempt to launch the Libra blockchain, which was ultimately shut down by regulators. After the shutdown, two members of the Libra leadership team, Mo Shaikh and Avery Ching established Aptos as a decentralized alternative to the discontinued blockchain project.
Aptos is built using the Move programming language and represents a new generation of layer-1 blockchains that will compete with the likes of Solana and Cardano. The driving factors behind the positive momentum for the APT token are investor expectations for technological advancements that will produce a secure, decentralized, and scalable blockchain solution.
In 2022, Aptos raised $350 million through a combination of a $200 million seed round led by Andreessen Horowitz and a $150 million Series A funding round led by FTX Ventures and Jump Crypto. Subsequently, Binance made a strategic investment to support the growth of the Aptos ecosystem.
The prominence of FTX Ventures raises concerns about the potential for a sell-off from the firm. The involvement of venture capital firms such as Multicoin Capital, Blocktower Capital, and Coinbase Ventures can mitigates this risk and provides some reassurance for investors. Additionally, the involvement of high-volume exchanges like Binance could help to counteract the impact of FTX and Alameda Research.

2. Continuous ecosystem development

The Aptos blockchain, which was launched in October 2022, is still in its early stages of development. Currently, there are few decentralized finances and non-fungible token projects on the blockchain, with limited use of smart contracts. More than 94% of the transactions on the blockchain are for APT transfers, indicating a lack of activity in decentralized applications.

The development of the Aptos blockchain is average, with several active developers that are higher than Avalanche and Tezos, but lower than Solana, Polkadot, Cardano, and Ethereum.

Aptos isn't unique in having a large market capitalization despite the limited activity on its blockchain, as other projects such as Cardano and Polkadot have also seen their token prices rise based on a strong technology narrative, despite a lack of significant on-chain activity.
The size of the Aptos community is smaller compared to the leading layer-1 projects like Cardano and Polkadot, which have over 1.3 million Twitter followers, while Avalanche and Tezos have over 470,000 and 855,600 followers, respectively.
Aptos has a following of 364,500 on Twitter. The future price movements of Aptos will be determined by the performance of the blockchain and the efforts of its business development team.

3. Traders' skepticism may drive up the price of APT

Due to the limited activity and ecosystem growth, the rise in APT's value has caught the market off guard. It is common to see tweets questioning the exaggerated market capitalization of the token.

However, selling the token against the trend could be risky. There is a growing number of people who are betting against APT in the form of perpetual swaps, as the token has surpassed its October 2022 high of approximately $15, as indicated by the negative funding rate for APT.

For buyers, this presents a chance to force sellers to close out their short positions by driving the price up. In the cryptocurrency market, short squeezes frequently occur and result in short orders being liquidated.

4. APT is under limited selling pressure

The APT token's economics restricts the selling pressure on the token during the first year after its launch in October 2022. The release schedule of APT delays the unlocking of tokens until October 2023, which will result in a significant increase in the number of APT tokens in circulation. Until the tokens are unlocked, the only source of token inflation will be from staking rewards, which are 7% for staked tokens.

Initially, the foundation distributed 2% of the tokens to early users and developers. Users who wanted to sell their APT tokens likely have already done so in the three months since its launch.

5. Kimchi premium

A major portion of the demand for APT comes from South Korean won trading on the UpBit cryptocurrency exchange, accounting for about 40% of Aptos' trading volume. The price of APT on UpBit is around 1% to 3% higher than the overall market price, demonstrating strong demand in the area, which is commonly referred to as the
"Kimchi premium".

The trading volume on Upbit may be artificially inflated through wash trading or market manipulation, as the exchange's owners have faced regulatory scrutiny in the past. Despite this, the high demand for APT in South Korea, as indicated by its higher price on the Upbit exchange, is likely to continue until the Kimchi premium dissipates.

The current price rise of APT may have started as a result of the overall positive trend in cryptocurrency prices, but it has now become a rally driven by disbelief, as sellers are being proven wrong. As long as the negative sentiment and Kimchi premium persists, there is a good chance that Aptos will continue to move higher.

APT had been steadily increasing in volume until the RSI
reached an overbought level at its all-time high. As the selling pressure
increased, APT made a small reversal and attempted but failed to break through
the previous resistance.

If the price holds the ascending trend line and avoids getting trapped in the upper support area between $14-18, it might update its all time high of $20.8 in the coming price rally.

Conclusion

Aptos has garnered attention and community support for its various features and services, becoming a popular emerging coin.
The sudden rise in prices has raised suspicions of market manipulation, but it's too early to reach any conclusions. Currently, the market looks bullish for APT, but the Fear and Greed index remains neutral. Before investing in Aptos, which is touted as a Solana-killer, it is always recommended to perform thorough market and project research.