The total cryptocurrency market cap is up 29.4% in two weeks, even though Bitcoin (BTC) price settled near $21,000 on January 3rd.
It is becoming increasingly difficult to justify the continuation of the downtrend after breaching the entire top of the $930B channel. However, the psychological resistance at $1 trillion remains strong.
The move likely reflects investors’ growing optimism about risky assets after weaker-than-expected measures of inflation indicated that the US Federal Reserve’s rate hike strategy is set to fade until 2023.
However, Klas Nott, who serves as governor of the Dutch Central Bank, stated on January 19 that the European Central Bank (ECB) “will certainly not stop [de aumentar os juros] After a single increase of 50 basis points.”
At the Davos Forum, Knot added: “Core inflation has not yet turned a corner in the eurozone.”
Basically, investors fear that another round of interest rate hikes will put more pressure on corporate earnings, leading to unemployment and a deep recession. In this case, the stock market sell-off becomes the most likely scenario and the cryptocurrency market is likely to continue its downward trend that started in 2022.
Proving the strong connection between cryptocurrencies and stock exchanges, the Russell 2000 Index fell by 3.4% between January 18th and 19th. The move coincides with a 4% correction of the total cryptocurrency market cap after flirting with the trillion-dollar mark on January 3rd.
The 10.4% gain in total market cap between January 12th and 19th was mostly affected by Bitcoin e and an 8.7% gain in Ether (ETH). The upside has been sharpest for altcoins, with eight of the top 80 altcoins gaining 20% or more over the period.
Metaverse-related tokens have rebounded after tech giant Apple announced the launch of its own VR headset. Among the biggest gainers were Decentraland (MANA), up 55%; Enjin (ENJ) up 37%; and Sandbox (SAND) by 30%.
Frax (FXS) stock soared 40% with 65,000 ether deposited to its trading protocol mask Net worth, which currently totals more than $100 million.
Privacy coins such as Monero (XMR) and ZCash (ZEC) plummeted after the US Department of Justice announced the arrest of the founder of Bitzlato, a now-closed peer-to-peer cryptocurrency exchange.
The demand for leverage in betting is increasing
Perpetual futures contracts, also known as trade-offs Conversely, it has a built-in charge that usually charges every eight hours. Exchanges use this rate to avoid currency risk imbalances.
A positive financing ratio indicates that buyers need more leverage. However, the opposite situation occurs when short positions (sellers) require additional leverage, causing the financing rate to turn negative.
The seven-day take rate was positive in all cases, which means that the data indicates an increased demand for leverage from buyers in this period. However, paying 0.25% per week to keep your bullish trades open shouldn’t be a huge concern for most investors.
Thus, traders should analyze the options markets to understand whether whale and arbitrage tables have placed higher bets on bullish or bearish strategies.
Investors are not afraid of dips, according to BTC Options
Traders can gauge overall market sentiment by gauging whether there is more activity running through buying (buying) or selling (buying) operations. In general, call options are used for bullish strategies, while put options are used for bearish bets.
A bid-ask ratio of 0.70 means that open sells are 30% behind buy calls, and therefore indicates optimism. On the other hand, the indicator of 1.40 supports the situation by 40%, which can be considered bearish.
Although Bitcoin failed to break the $21,500 resistance on January 18, there were no signs of increased demand to protect against further losses. This is evident as long selling volume remained below 0.80 throughout, even after the negative move of 5.5% on January 18th.
Bearish neutral strategies maintain strong demand in the bitcoin options markets, with calls favoring 23%.
Derivatives markets suggest support at $930B is strong
After strong gains over the past seven days, the cryptocurrency market continues to show resilience despite warnings that a “global financial meltdown” is on its way from BitMEX founder Arthur Hayes. “
As measured by cryptocurrency derivatives, there is hardly any sense of fear or lack of demand for leveraged long positions after the total market cap missed the opportunity to cross the $1 trillion mark. These are encouraging signs, especially when combined with the technical analysis of the bearish channel breakout.
Thus, odds are that the previous channel top at $930 billion has become a strong support level. So far, even deflation in traditional markets shouldn’t be a major concern for cryptocurrency speculators, but investors should continue to monitor derivatives metrics.
The views, ideas and opinions expressed herein are those of 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 do their own research when making a decision.