Total crypto market cap shows strength even after the merger and Federal Reserve rate hike
Cryptocurrencies have been in a bearish trend since mid-August after failing to break above the $1.2 trillion market cap resistance. Even with today’s bear trend and a brutal 25% correction, it hasn’t been enough to break the three-month uptrend.
The crypto markets’ combined capitalization fell 7.2% to $920 billion in the seven days leading up to September 21. Investors wanted to play it safe ahead of the meeting of the Federal Open Markets Committee, which decided to raise interest rates by 0.75%.
By increasing the cost of borrowing cash, the monetary authority aims to dampen inflationary pressures and at the same time increase the burden on consumer finance and corporate debt. This explains why investors moved away from risk assets, including stock markets, foreign exchange, commodities and cryptocurrencies. For example, the WTI oil price fell 6.8% from September 14, and the MSCI China stock index fell 5.1%.
Ether (ETH) also saw a 17.3% pullback over the seven-day period, with many altcoins underperforming even more. The Ethereum network Merge and its subsequent impact on other GPU-minable coins caused some skewed results among the worst weekly performers.
Chiliz (CHZ) rallied 21.5% after two successful launches of fan tokens from MIBR esports team and VASCO soccer team from Brazil.
XRP surged 16.6% after Ripple Labs asked a federal judge to immediately rule on whether the company’s XRP token sale violated US securities laws.
ApeCoin (APE) gained 15% as the community expects the stake program to launch, which it should detailed by Horizen Labs on September 22.
RavenCoin (RVN) and Ethereum Classic (ETC) clawed back most of their gains from last week as investors realized that the hash gains from Ethereum miners were not necessarily converting to higher usage.
Traders’ appetite did not wane despite the correction
The OKX Tether (USDT) premium is a good gauge of China-based crypto trading demand. It measures the difference between China-based peer-to-peer trades and the US dollar.
Excessive buying demand tends to push the indicator above fair value of 100%, and during bearish markets, Tether’s market supply is flooded, resulting in a discount of 4% or more.
The Tether premium currently stands at 100.7%, the highest level since June 15th. While still below the neutral range, the indicator showed modest improvement over the past week. Considering that crypto markets fell by 7.2%, this data should be seen as a victory.
Perpetual contracts, also known as inverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use this fee to avoid imbalances in currency risk.
A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to become negative.
As shown above, the cumulative seven-day funding rate was negative for every altcoin. This data indicates excess demand for shorts (sellers), although it can be rejected in Ether’s case because investors targeting the free fork coins during the merger likely bought ETH and sold futures contracts to hedge their position.
More importantly, Bitcoin’s funding rate remained mildly positive during a week of price declines and potentially bearish news from the FED. Now that this critical decision has been made, investors tend to avoid placing new bets until some new data provides insight into how the economy is adjusting.
Overall, the Tether premium and futures funding rate show no signs of stress, which is positive considering how poorly the crypto markets have performed.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.
