The total market capitalization of the cryptocurrency has fallen 8.1% over the past two days after failing to break the $880 billion resistance on Dec. 14.
The rejection canceled out the 4-week uptrend, but a weekly close below $825bn would confirm a move to the lower zone and lower the support level to $790bn.
Overall investor sentiment towards the market remains bearish, with losses totaling 66% for the year. Despite this, the price of Bitcoin (BTC) fell just 2% over the week, falling to $16,800 as of 17:00 UTC on December 16.
A completely different scenario is emerging for altcoins, which are under pressure from current regulations and fear that major exchanges and miners will go bankrupt. This explains why the total market capitalization has decreased by 4.7% since December 9.
According to court documents filed on December 15, the US trustees announced that the commission will be responsible for part of FTX's bankruptcy proceedings. These include major market maker Wintermute Asia and GGC International, a subsidiary of distressed credit platform Genesis. Investors are still unsure who is the biggest creditor of the bankrupt exchange group FTX, fueling speculation that the contagion could spread further.
On December 15, the Dutch central bank issued a warning to investors using KuCoin, saying that the exchange was operating without official registration. De Nederlandsche Bank added that the cryptocurrency company was offering users "illegal services" and "illegal escrow wallets."
Adding to the uproar, Mazars Group, a company known for its auditing services that test the stock of crypto companies, removed recent documents detailing stock audits from its website on December 16. Previously, the company was named the official auditor of Binance's proof-of-stake updates, a move joined by KuCoin and Crypto.com.
The Bitcoin mining industry is also experiencing a sharp correction in cryptocurrency prices and rising energy costs. State mining company Core Scientific has been offered a $72 million credit line to avoid bankruptcy. Financiers demand that all payments to equipment lender Core Scientific stop as Bitcoin remains below $18,500.
The 4.7% weekly decline in total market capitalization was primarily driven by negative 5.4% price performance from Ether (ETH) and BNB (BNB), which traded 15.1% higher. As a result, the bearish sentiment had a significant impact on altcoins, with 14 of the top 80 coins dropping 12% or more during this period.
Open Network (TON) surged 30% after Telegram offered to sell anonymous phone numbers in exchange for TON tokens.
Bitcoin SV (BSV) is up 11.7% after Craig Wright, the self-proclaimed Satoshi Nakamoto and head of the altcoin project, appealed his defeat in a Norwegian court.
Trust Wallet (TWT) posted a 27.2% correction after its parent company (Binance) lost $1.9 billion in 24 hours.
Leverage demand is balanced between bulls and bears
Data currently shows that the demand for leverage is split between bulls and bears.
Perpetual contracts, also known as reverse swaps, have built-in fees that are typically charged every eight hours. Exchanges use these fees to hedge currency risk imbalances.
A positive funding level indicates that prior demand (buyers) is being maximized. However, the opposite situation occurs when short sellers (sellers) need additional leverage, making the funding rate negative.
The 7-day funding rate is close to zero for Bitcoin and altcoins, which means that the data shows balanced demand for long (buyers) and short (sellers) leverage over the period.
Traders should also analyze the options market to understand which arbitrage points and charts are placing higher bets in bullish or bearish strategies.
Put/Call volume reflects a neutral market
Traders can gauge overall market sentiment by assessing whether there is more activity with Call (Buy) or Put (Sell) options. Generally, call options are used for bullish strategies while put options are used for bearish strategies.
A rate index of 0.70 indicates open interest put options are 30% below bullish and bullish calls. Conversely, the 1.40 indicator favors the 40% reversal option, which can be considered bearish.
Although the Bitcoin price failed to break the $18,000 resistance on Dec. 14, there was no excessive demand for drop protection options. Specifically, since December 12, the indicator has been below 1.00, therefore it has risen slightly.
Currently, the put-to-call ratio is near 0.88, as the options market is generally bullish in favor of 12% call options.
The derivatives market is neutral, but the news flow is negative
Despite a significant weekly drop in the price of several altcoins and a 4.7% decline in total market capitalization, derivatives metrics show no signs of panic.
There is a balanced demand for long and short positions in futures contracts. As a result, risk-weighted benchmarks for BTC options remain favorable even after Bitcoin corrected 8.5% from its Dec. 14 high of $18,370.
Ultimately, bulls should not expect the $825 billion market cap to hold, which does not mean the $790 billion support will be retested immediately.
For now, the lower band of the uptrend continues to exert bullish pressure, but the news looks favorable for the bears.
The views, thoughts and opinions expressed herein are those of the authors themselves 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 step involves risk and readers should do their own research when making decisions.