Despite the fact that traders are actively adding to both their long and short positions, the total market capitalization of cryptocurrencies is in danger of slipping below $825 billion.
After failing to break through the $880 billion hurdle on December 14, the total market capitalization of cryptocurrencies has experienced a decline of 8.1% over the past two days.
The rejection did not render the ascending channel that had been in place for the past four weeks invalid; but, a weekly close that is lower than $825 billion will confirm a shift to the bottom band and cut the support level to $790 billion.
The majority of investors continue to have a pessimistic outlook on the market, which has resulted in a loss of 66% since the beginning of the year. In spite of this, the price of Bitcoin fell by only 2% during the course of the week, reaching a low of $16,800 at 17:00 UTC on December 16.
A very different picture has unfolded in regard to alternative cryptocurrencies, which are currently under intense pressure due to the impending implementation of regulation and the widespread concern that large cryptocurrency exchanges and miners may go bankrupt. This helps to explain why the entire market value had fallen by 4.7% since December 9 of last year.
The committee that would be responsible for some of FTX’s bankruptcy procedures was announced on the 15th of December, according to court records that were submitted on that day. One of these is Wintermute Asia, which is a prominent market maker, and another is GGC International, which is an associate of the problematic lending platform Genesis. Speculation that the contagion could continue to spread is being fueled by the fact that investors do not know who the largest debtors are from the bankrupt FTX exchange firm.
On December 15, the Dutch Central Bank issued a warning to investors who used KuCoin, stating that the exchange was operating without legal authorization and that investors should exercise caution. In addition, De Nederlandsche Bank stated that the cryptocurrency company was “illegally offering services” to customers as well as “illegally offering custodial wallets.”
According to reports, a business known for providing proof-of-reserve audit services for cryptocurrency companies, Mazars Group, erased recent papers from its website on December 16 that detailed exchange audits. This development added to the ongoing controversy. The company had previously been selected to act in the capacity of official auditor for Binance’s proof-of-reserve updates. This was a trend that was later adopted by Kucoin and Crypto.com.
A significant decline in cryptocurrency values, together with steadily increasing energy prices, has been detrimental to the Bitcoin mining industry as well. In order to avert bankruptcy, a contingent emergency credit line in the amount of $72 million was made available to the publicly traded mining company Core Scientific. While Bitcoin’s price is below $18,500, the financial lender requests that all payments to Core Scientific’s equipment lenders be put on hold.
Ether’s price movement over the week was negative by 5.4%, and overall trading was 15.1% lower, both of which contributed significantly to the total market value falling by 4.7%. As a direct result of this adverse mood, alternative cryptocurrencies experienced huge losses, with 14 of the top 80 coins falling by 12% or more throughout the timeframe.
After Telegram began accepting bids for anonymous phone lines in exchange for TON tokens, The Open Network (TON) saw a gain of thirty percent.
After the self-proclaimed Satoshi Nakamoto and leader of the altcoin project, Craig Wright, filed an appeal to his defeat in Norway courts, Bitcoin SV (BSV) experienced a price increase of 11.7%.
After its parent firm (Binance) was hit with withdrawal requests totaling $1.9 billion in just 24 hours, Trust Wallet (TWT) experienced a correction of 27.2%.
Demand for leverage is evenly split between bulls and bears at this time.
At this time, the data indicate that demand for leverage is shared equally between bulls and bears.
An embedded rate is one that is levied on perpetual contracts, which are also known as inverse swaps. This rate is typically charged every eight hours. These fees are used by exchanges to prevent imbalances in exchange risk.
If the financing rate is positive, this suggests that longs (buyers) are demanding additional leverage. On the other hand, the opposite scenario takes place when shorts (sellers) seek extra leverage, which results in the funding rate becoming negative.
The seven-day financing rate for Bitcoin and altcoins was extremely close to zero, which indicates that the data suggests to a balanced demand between leverage longs (purchasers) and shorts (sellers) during the time in question.
Traders should also monitor the options markets to determine whether whales and arbitrage desks have put bigger bets on bullish or bearish strategies. This can help traders determine which strategies are more likely to be successful.
The number of options put and calls suggests a market that is balanced.
Traders are able to get a sense of the overall sentiment of the market by determining whether or not there is a greater volume of activity going through call (buy) options or put (sell) options. Call options, in general, are utilised for bullish tactics, whilst put options are used for bearish strategies.
A put-to-call ratio of 0.70 shows that open interest in put options is 30% behind open interest in more bullish call options, which is a positive sign. On the other hand, an indicator of 1.40 favours put options by a factor of 40%, which may be seen as bearish.
On December 14, despite the fact that Bitcoin’s price was unable to break through the $18,000 resistance level, there was not an extraordinary demand for downside protection utilising options. To be more specific, the indicator has been below 1.00, indicating a cautiously hopeful outlook, since the 12th of December.
Because the options market is more heavily inhabited by neutral-to-bullish strategies, which prefer call (buy) options by 12%, the put-to-call volume ratio is now hovering close to 0.88. This is due to the fact that the ratio favours call (buy) options.
The derivatives markets remain quiet, but the newsflow has been poor.
In spite of a significant weekly price drop in a few cryptocurrencies and a decrease of 4.7% in the total market capitalization, derivatives measures do not reveal any symptoms of panic.
The demand for long positions and short positions utilising futures contracts has been relatively equal. As a consequence of this, the Bitcoin options risk evaluation metric is still favourable despite the 8.5% drop that Bitcoin saw after reaching a high of $18,370 on December 14.
The $825 billion market capitalization should not be expected to hold in the end, however this does not necessarily suggest that there will be an immediate retest of the $790 billion support level.
Even though the lower band of the ascending channel is still applying upward pressure at the moment, it appears that bears are likely to benefit from the newsflow.