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Data shows traders are slightly bullish even as the total market cap of cryptocurrencies drops below $800 billion

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The total cryptocurrency market capitalization decreased by 5% between November 14 and November 21, to $795 billion. However, overall sentiment is much worse, considering this rating is the lowest since December 2020.

Total market capitalization of cryptocurrencies in USD, for 4 hours. Source: TradingView

bitcoin price (BTC) is only down 2.8% for the week, but investors don’t have much to celebrate because the current level of $16,100 represents a 66% year-to-date decline. even if A breakdown of FTX and Alameda Research Pricing in, investor uncertainty is now focused on Grayscale funds, including the $10.5 billion Grayscale Bitcoin Trust.

Genesis Trading, part of the Digital Currency Group (DCG) conglomerate, Stop withdrawals on November 16th. In its latest quarterly report, the crypto derivatives trading and lending company said it had $2.8 billion worth of active loans. The fund manager, Grayscale, is a subsidiary of DCG, and Genesis acted as the liquidity provider.

The weekly decline of 5% in the total market cap was mostly influenced by Ether (ETH) negative price movement 8.5%. However, bearish sentiment had a bigger impact on altcoins, with nine of the top 80 altcoins losing 12% or more in the period.

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

litecoin (LTC) increased by 5.6% after the addresses idle in the network for one year exceeded 60 million coins.

near NEAR protocol (near) fell by 23% due to concerns about the 17 million tokens held by FTX and Alameda, which backed the Near Foundation in March 2022.

MANA in Decentraland (mana(lost 15% and Ethereum Classic)etc.) another 13.5% as both projects had significant investment from Digital Currency Group, the controller of troubled Genesis Trading.

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Leverage demand 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 November 21. Source: Coinglass

The seven-day funding rate has been slightly negative for Bitcoin, so the data indicates increased demand for short positions (sellers). However, the 0.20% weekly cost of maintaining a bearish position is nothing to worry about. Furthermore, the remaining altcoins – apart from Solana’s SOL (sol) – provided mixed numbers indicating that there is a balanced demand between buy (buyers) and sell positions.

Traders should also analyze the options markets to understand whether whale and arbitrage desks are placing higher bets on bullish or bearish strategies.

The put/call options ratio is showing a moderate upward trend

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 the open interest of put options lags bullish calls by 30% and is therefore bullish. In contrast, the 1.20 index favors put options by 20%, which can be seen as bearish.

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BTC options buy-to-buy ratio. Source: Laevitas

Despite the bitcoin price breaking below $16,000 on November 20, investors did not rush to protect against the downside with options. As a result, the buy-to-buy ratio has held steady near 0.54. Moreover, the Bitcoin options market is still aggressively filled with neutral to bearish strategies, as indicated by the current level favoring long options (calls).

Derivatives data shows the resilience of investors given the absence of excessive demand for bearish bets according to the funding ratio of futures contracts and the open interest of neutral to bullish options. Thus, the odds are favorable for those betting that the $800 billion market capitalization support will show strength.