January euphoria in crypto markets turned to February worry as investors sent prices of most, major digital assets lower.
The retreat coincided with a cascade of concerning inflation and jobs data, starting with lukewarm consumer price index (CPI) data in the first half of the month and continuing with an alarming steadiness in jobless claims and an even more alarming rise in consumer spending. It also came amid a flurry of regulatory action in the U.S. that raised concerns about government agencies overreaching or misdirecting their efforts.
Ether (ETH), the second-largest crypto by market value, also traded sideways for the month to hover just over $1,600. ETH rose more than 30% in January.
“I think the narrative of ETH withdrawals and the Shanghai update that's coming made a lot of people worry that those wouldn't perform as well,” Katie Talati, head of research at crypto asset-management firm Arca, told CoinDesk. “But a lot of people have accrued revenue in fees that they've earned over this staking period.”
Bitcoin layer 2 protocol Stacks Network’s native STX token grabbed the biggest winner trophy among 160 assets in the CoinDesk Market Index, soaring 216% in February. The STX token started off the month hovering around 27 cents and climbed as high as 95 cents on Feb. 27 before retreating slightly.
The STX price surge coincided with market participants' growing interest in creating Ordinal non-fungible tokens (NFTs), which are non-fungible tokens on bitcoin enabled by so-called inscriptions on Bitcoin’s mainnet.
Arca’s Talati said that the broader idea of improving the Bitcoin network’s scalability has been around since Bitcoin’s Taproot upgrade – multiple signatures and transactions batched together for better privacy and scalability – in November 2021.
But she added: “More information has become available in the last few weeks in people buying and trading them more. A lot of people have been saying, ‘Well, if Ordinals do really well, this gives a reason for people to use the Bitcoin network, and therefore they'll have the need to use Stacks.'”
Talati noted that there’s still no marketplace or infrastructure for Bitcoin NFTs yet. “People are trading these Ordinals via over-the-counter [OTC] using spreadsheets for bids and asks.” she said.
Gaming- and metaverse-affiliated tokens, which led January’s leaderboard, were among February’s biggest laggards. GMT, the native token of the STEPN ecosystem in the Culture and Entertainment sector, dipped 33% this month, while Gala Games' native GALA token, which surged 233% last month, dropped 28% in February.
Layer 1 network Aptos’ APT token, which surged 387% in January, dropped nearly 30% in February.
Vetle Lunde, senior analyst at crypto research firm Arcane Research, wrote in a weekly note that the recent ups and downs of tokens, saying that in three out of the last four weeks, the "top 50 coin" winner of the previous week has become the next week’s worst performer.
“Altcoin cycles tend to be short-lived, but this is beyond the norm and has all the hallmarks of a bored market chasing opportunities, in addition to no new capital inflows,” he wrote, adding: “Poor liquidity facilitates this erratic pattern, and you do not want to be the one holding the bag when the music ends.”
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.