Cryptocurrency market capitalization has fallen by 1.5% to $840 billion over the past seven days. Overall sentiment remains bearish, with a year-to-date loss of 64%, but the slightly negative move did not break the rising channel he started on Nov. 12.
Bitcoin (BTC) fell 0.8% over the week, stabilizing around $16,800 at 10:00 UTC on December 8, before finally surpassing $17,200 later in the day. As debates over crypto market regulation put pressure on the market and the collapse of the FTX exchange limited trader appetites, lawmakers cautioned against the potential impact on financial institutions and lack of protection for retail investors. I turned it.
On Dec. 6, the Financial Crimes Enforcement Network (FinCEN) said it was “taking a close look” at decentralized finance (DeFi), with agency director Himamauri Das saying that the digital asset ecosystem and digital currency are “ It is an important priority area,” he said. In particular, regulators were concerned about DeFi’s “potential to reduce or eliminate the role of a financial intermediary,” which is essential in its efforts to combat money laundering and terrorist financing.
Hong Kong’s Legislative Council has approved a new licensing regime for virtual asset service providers. From June 2023, cryptocurrency exchanges will be subject to the same laws as traditional financial institutions. This change will require stricter anti-money laundering and investor protection measures before an operating license can be guaranteed.
Meanwhile, Australian financial regulators are actively working on ways to incorporate payment stablecoins into the financial sector regulatory framework. On December 8, the Reserve Bank of Australia released a report on stablecoins, pointing out the risks of disrupting funding markets, including bank exposure and liquidity. The analysis highlighted specific vulnerabilities of algorithmic stablecoins, noting the collapse of the Terra Luna ecosystem.
The 1.5% weekly drop in total market capitalization was largely driven by Ether (ETH)’s negative 3% price move and BNB (BNB), which fell 2.5%. Still, bearish sentiment has had a major impact on altcoins, with 10 of the top 80 coins dropping more than 8% over the period.
Trust Wallet (TWT) grew 18.6% as service providers gained market share from browser extensions. wallet Released in mid-November.
Axie Infinity Shards (AXS) rose 17.6% as investors adjusted their expectations after a significant 89% revision since the first quarter of 2022.
Chainlink (LINK) saw a 10.1% adjustment after its staking program launched into early access on December 6th. This shows that investors were anticipating this event.
1INCH fell 15.2% after 15% of supply was unlocked on Dec 1 under the original 4-year vesting schedule.
Leverage demand is balanced between bullish and bearish
Perpetual contracts, also known as inverse swaps, have built-in rates that are typically billed every 8 hours. Exchanges use this fee to avoid currency risk imbalances.
A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when the short (seller) requires additional leverage, resulting in a negative funding rate.
The 7-day funding rate for Bitcoin and Altcoins was near zero. In short, the data shows that there is balanced demand between long (buyers) and short (sellers) leveraged positions during this period.
Traders should also analyze the options market to understand whether whales and arbitrage desks have placed high bets on bullish or bearish strategies.
Options put/call ratio reflects moderate bullishness
Traders can gauge overall market sentiment by measuring whether more activity is taking place via call (buy) or put (sell) options. Generally speaking, call options are used for bullish strategies and put options are used for bearish strategies.
A put-to-call ratio of 0.70 indicates that the put option open interest lags the more bullish call by 30% and is therefore bullish. In contrast, if the indicator is 1.40, the put option is 40% better and can be considered bearish.
Bitcoin price failed to break out of the $17,500 resistance on December 5, but there was only a temporary over-demand for downside protection using options.
Currently, the options market is more heavily populated by neutral to bearish strategies, with 60% support for call (buy) options, resulting in a put-to-call volume ratio near 0.40.
Related: US Lawmakers Are Questioning Federal Regulators About Banks’ Ties With Crypto Firms
Derivatives market points to upside potential
Derivatives indicators showed no signs of a deterioration in sentiment despite weekly price declines for a handful of altcoins and a 2% drop in total market cap.
With balanced demand for leverage using futures contracts, BTC options risk metrics remain good even after Bitcoin price failed to break out of the $17,500 level.
As a result, the odds are in favor of those betting that the rising channel will win, pushing the market cap to the $875 billion resistance. A breakout of the channel would give the bulls a much-needed breather after a week of negative news flow.
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