Total cryptocurrency market capitalization over the past seven days fell 1.5% to $840 billion. A small downside move failed to break the bullish channel that started on November 12, though overall sentiment remains bearish, with a 64% loss since the start of the year.
The price of Bitcoin (BTC) fell 0.8% on a weekly basis, settling near $16,800 as of 10:00 UTC on December 8, though it eventually broke through the $17,200 mark on the same day. Discussions about the regulation of cryptocurrency markets put pressure on the markets, and the collapse of the FTX exchange curbed traders' appetite, forcing regulators to pay attention to the potential impact on financial institutions and the lack of protection for retail investors.
On December 6, the Financial Crimes Enforcement Network (FinCEN) said it was keeping a close eye on decentralized finance (DeFi), with the agency's acting director Hemauli Das saying the digital asset and digital currency ecosystem was " key". Priority area.” The regulator was particularly concerned about "the potential for DeFi to reduce or eliminate the role of financial intermediaries" who are central to 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 regulations as traditional financial institutions. The change will require stricter anti-money laundering and investor protection measures before a license to operate is granted.
Meanwhile, Australian financial regulators are actively working on ways to integrate stable payment currencies into the regulatory framework for the financial sector. On December 8, the Reserve Bank of Australia published a stablecoin report that shows the risks of turbulence in financial markets, such as banking and liquidity risks. The analysis highlighted the fragility of algorithmic stablecoins, indicating the collapse of the Terra-Luna ecosystem.
The weekly decline of 1.5% in total market value was mainly influenced by a negative movement of 3% in the price of Ether (ETH) and BNB (BNB), which fell by 2.5%. However, the downtrend had a significant impact on cryptocurrencies, with 10 of the top 80 coins falling 8% or more during the period.
Trust Wallet (TWT) rose 18.6% as the service provider gained market share with the launch of its add-on browser wallet in mid-November.
Axie Infinity Shards (AXS) rose 17.6% as investors revised their expectations after a sharp 89% correction from the first quarter of 2022.
Chainlink (LINK) saw a 10.1% correction after the strike program opened for early access on December 6, indicating that investors were waiting for the opportunity.
Shares of 1INCH fell 15.2% after opening 15% of the deal on Dec. 1 in the initial four-year grant schedule.
Demand for leverage is balanced between bulls and bears
Perpetual contracts, also known as reverse swaps, have a built-in fee, typically charged every eight hours. Exchanges use these fees to avoid an imbalance of currency risk.
A positive funding ratio indicates that long positions (buyers) require more leverage. However, the opposite is true when short sellers require additional leverage, causing the funding rate to turn negative.
The seven-day funding rate for bitcoin and altcoins was close to zero, meaning the data shows balanced demand between long-term funds (buyers) and leveraged sales (sellers) during the period.
Traders should also analyze the options markets to see if whales and arbitrage firms are betting more on bullish or bearish strategies.
The supply/demand ratio reflects a moderate bullish sentiment.
Traders can assess the overall state of the market by determining whether there is more activity with buying (calls) or selling (put) options. Generally, call options are used for bullish strategies and put options for bearish strategies.
A call-to-call ratio of 0.70 indicates that the open interest of the call option is 30% bullish and therefore bullish. On the contrary, the 1.40 indicator favors 40% put options, which can be considered bearish.
Although the price of bitcoin failed to break the $17,500 resistance level on December 5, there was only a temporary increase in the supply of downside protection through the use of options.
The bid-to-buy volume ratio is currently around 0.40 as the options market is full of bearish neutral strategies, with 60% favoring calls.
On this topic: US lawmakers are questioning federal regulators about banks' dealings with crypto firms
Derivatives markets show a positive potential
According to the derivative metric, despite weekly declines in the prices of several altcoins and a 2% drop in total market capitalization, there were no signs of abating sentiment.
There is a balanced demand for leverage from the futures contracts and the BTC option risk score remains favorable even after the bitcoin price failed to break above $17,500.
Therefore, the odds are in favor of those who bet that the upward trend will prevail and push the total market capital to the $875 billion resistance. A break above the channel would give the bulls a much-needed break after a week of negative news.
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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.