On May 12, the total cryptocurrency market capitalization hit its lowest close in 10 months and the metric continues to test the $1.23 trillion support level. However, the next 7 days were reasonably quiet as Bitcoin (BTC) gained 3.4% and Ether (ETH) added a modest 1.5%. Currently, the aggregate capitalization of cryptocurrencies stands at $1.31 trillion.
Ripples from the collapse of Terra (LUNA) continue to impact cryptocurrency markets, especially the decentralized finance industry. Additionally, the recent decline in traditional markets has led to a $7.6 trillion loss in the Nasdaq stock index’s market capitalization, which is higher than the dot-com bubble and March 2020 sales.
On May 17, the chairman of the US Federal Reserve, Jerome Powell, confirmed his intention to suppress inflation by raising interest rates, but warned that the Fed’s tightening move could affect the interest rate. unemployment.
The bearish sentiment spread to the crypto markets with the “Fear and Greed Index”, a data-driven sentiment indicator, reaching 8/100 on May 17. This is the lowest value for the metric since March 28, 2020 and two weeks after the widespread drop that sent oil futures into negative levels and pushed Bitcoin (BTC) below $40,000.
Here are the tokens that have risen and fallen the most in the last seven days. While the top two cryptocurrencies posted modest gains, a handful of mid-cap altcoins were up 15% or more.
Monero (XMR) rose 22% as investors awaited the “tail issue” to be implemented at block 2,641,623 or sometime around June 4. The community decided to include a minimum reward of 0.6 XMR on each blockso that miners are not 100% dependent on transaction fees.
Cosmos (ATOM) gained 16.5%, a move that appears to be part of a broader pullback that began on May 12, when ATOM fell to its eleven-month low near $8. Notably, its parent chain, Cosmos Hub, witnessed massive capital outflows from its liquidity pools, Cointelegraph reported.
Klaytn (KLAY), a blockchain backed by South Korean internet giant Kakao, announced on May 16 that it would provide infrastructure, initial nodes, and develop the first blockchain-based service network (BSN) use cases, which would entail an entry into the Chinese market.
The Tether (USDT) premium on OKX is a good indicator of the demand for crypto from China-based retail traders. It measures the difference between China-based peer-to-peer (P2P) trading and the US dollar.
Excessive buying demand tends to push the indicator above 100% fair value and during bear markets, Tether’s market supply is flooded causing a discount of 4% or more.
Tether’s premium peaked at 5.4% on May 12, its highest level in over 6 months, but the move could have been related to massive outflows from the Terra ecosystem, which were primarily the dollar stablecoin Terra (UST). .
More recently, the indicator showed a modest deterioration, as it is currently discounted at 1.8%. The lack of retail demand is not particularly concerning as the total cryptocurrency market capitalization has lost 34% in the past month.
Altcoin futures reflect disinterest in leverage
Perpetual contracts, also known as reverse swaps, have an implied rate that is typically charged every eight hours. Exchanges use this rate to avoid imbalances in exchange risk.
A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when shorts (sellers) demand more leverage, causing the funding rate to turn negative.
Perpetual contracts are reflecting mixed sentiment, with Bitcoin and Ethereum holding a slightly positive (bullish) funding rate, but altcoins signaling otherwise. For example, Solana’s (SOL) negative weekly rate of 0.35% equates to 1.5% per month, which is of no concern to most derivatives traders.
Considering that derivatives indicators are showing little improvement, there is a lack of investor confidence as the total cryptocurrency market capitalization struggles to hold the $1.23 trillion support. Until this sentiment improves, the odds of an adverse price move remain high.
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