February 4, 2023


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The total cryptocurrency market cap is approaching 1 terabyte right with the price of bitcoin moving towards $20,000

The total cryptocurrency market cap is approaching 1 terabyte right with the price of bitcoin moving towards $20,000

The total market capitalization of cryptocurrencies reached its highest level in more than two months on January 13 after crossing the $900 billion mark on January 12.

While the year-to-date gain of 15.5% looks promising, the level is still 50% below the $1.88 trillion cryptocurrency market cap seen before the Terra-Luna ecosystem crash in April 2022.

Total cryptocurrency market capitalization, in USD. Source: TradingView

“Hopeful skepticism” is probably the best description of most investors’ feelings right now, especially after recent struggles to regain a trillion-dollar market capitalization in early November. This rally to $1 trillion was followed by a correction of 27.6% in three days and negated any bullish momentum traders were expecting.

bitcoin (BTC) by 15.7% year-to-date, but a different scenario emerged for altcoins, with a few of them gaining 50% or more in the same period. Some investors attribute the rise to US CPI data released on January 12, which confirmed the assumption that inflation continues to decline.

While macroeconomic conditions may have improved, the situation for cryptocurrency companies looks bleak. New York-based Metropolitan Commercial Bank (MCB) announced on January 9 that it will close its crypto assets vertical, citing changes in the regulatory landscape and recent setbacks in the industry. Cryptocurrency-related clients accounted for 6% of the bank’s total deposits.

On January 12, the US Securities and Exchange Commission (SEC) imposed charges on cryptocurrency lending firm Genesis Global Capital and cryptocurrency exchange Gemini with Offering unregistered securities Through Gemini’s “Earn” program.

The January 13 knockout came next Crypto.com It announced a new wave of layoffs on January 13, cutting its global workforce by 20%. Other cryptocurrency exchanges that recently announced job cuts last month include Kraken, Coinbase, and Huobi.

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Despite the apocalyptic news flow, macroeconomic tailwinds favoring risky assets ensured that UNUS SED (LEO) only closed the first 13 days of 2023 in the red.

Weekly winners and losers among the top 80 coins. Source: Nomex

Lido DAO (LDO) is up 108% as investors anticipate what’s next Ethereum Shanghai Upgrade That enables stack ether withdrawals to increase the demand for liquid storage protocols.

Aptos (APT) is up 98% after some decentralized applications started increasing volume, including Liquidswap DEX, Ditto Finance Staking, Yield and NFT Topaz Market.

Optimism (OP) gained 70% after the layer-2 network picked up activity, and in combination with its competitor Arbiturm, Bypassing the Ethereum mainchain transactions.

The demand for leverage is balanced between bulls and bears

Perpetual contracts, also known as reverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use these fees to avoid imbalances in exchange risk.

A positive funding ratio indicates that long contracts (buyers) require more leverage. However, the opposite situation occurs when short positions (sellers) require additional leverage, causing the financing rate to turn negative.

Perpetual futures contracts accumulated at a 7-day funding rate on January 13th. Source: Coinglass

The 7-day funding rate was close to zero for Bitcoin and altcoins, which means the data indicates a balanced demand between long buy (buyers) and sell (seller) contracts.

If the bears pay 0.3% per week to maintain their leveraged bets on Solana (sol) And BNBand that only adds up to 1.2% per month – which is not suitable for most traders.

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Related: Bitcoin rises to $19K, but the analyst says a retest of $17.3K could happen after that

Traders’ demand for options rose from neutral to bullish

Traders can gauge overall market sentiment by gauging whether more activity is going through with buying (going long) or selling (selling) options. In general, call options are used for bullish strategies, while call options are used for bearish strategies.

A ratio of 0.70 to long indicates that open interest in put options lags bullish calls increasing by 30%, which is bullish. In contrast, the indicator 1.40 favors put options by 40%, which can be considered bearish.

BTC options volume buy-to-order ratio. Source: laevitas.ch

Between January 4th and January 6th, protective puts dominated the space as the index rose above 1. The move eventually faded and the opposite situation emerged as demand for call options increased from neutral to bullish since January 1st. 7.

The lack of leverage shorts and the demand for protection are putting the points towards an uptrend

Looking at gains of 15.7% since the start of 2023, derivatives metrics reflect zero signs of demand from leveraged shorts or hedge put options. While the bulls can celebrate that the $900 billion total market cap encountered little resistance, derivatives metrics show bears are still patiently waiting for an entry point for short positions.

Given the bearish news flow in the market, the main hope for the bulls remains only within the framework of the favorable macroeconomic environment, which largely depends on how the retail sales data will be reported next week.

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China is also expected to release its economic figures on January 16th, and the United States will do the same on January 18th. Another potential impact on the price could be the UK CPI which is due to be released on January 18th.