The total cryptocurrency market capitalization passed $1 trillion on July 18, following an agonizing thirty-five day stint below the key psychological level. Over the next 7 days, Bitcoin (BTC) was flat near $22,400 and Ether (ETH) faced a 0.5% correction to $1,560.
Total cryptocurrency capitalization closed on July 24 at $1.03 trillion, a modest negative 0.5% move over 7 days. The apparent stability is skewed by the flat performance of BTC and Ether and the $150 billion value of stablecoins. The broader data hides the fact that 7 of the top 80 coins fell 9% or more in the period.
Although the chart shows support at the $1 trillion level, it will take some time for investors to regain the confidence to invest in cryptocurrencies and actions by the US Federal Reserve could have the biggest impact on price action.
Furthermore, the sit-and-wait mentality could be a reflection of the important macroeconomic events scheduled for the coming week. Generally speaking, worse-than-expected data tends to increase investors’ expectations for dovish action, which is beneficial for riskier assets like cryptocurrencies.
The Federal Reserve’s monetary policy meeting is scheduled for July 26-27, with investors expecting the US central bank to raise interest rates by 75 basis points. In addition, on July 27, the second-quarter gross domestic product (GDP) of the United States, the broadest measure of economic activity, will be published.
A capitalization of a trillion dollars is not enough to instill confidence
Investor sentiment improved from July 18, as reflected in the Fear and Greed Index, a data-driven gauge of sentiment. The indicator currently stands at 30 out of 100, which is an increase from 20 on July 18, when it hovered around the “extreme fear” zone.
Keep in mind that while the entire $1 trillion cryptocurrency market capitalization has recovered, trader sentiment hasn’t improved much. Listed below are the tokens that rose and fell the most from July 17 to July 24.
Arweave (AR) faced a technical correction of 20.6% after an impressive 58% rally between July 12 and 18, after the network file sharing solution surpassed 80 terabytes (TB) of data storage. data.
Polygon (MATIC) was down 11.7% after Ethereum co-founder Vitalik Buterin supported the implementation of zero-knowledge rollup technology, a feature currently in the works for Polygon.
Solana (SOL) fell 9% after smart contract network demand could be negatively affected by Ethereum’s upcoming migration to a Proof-of-Stake consensus.
Retail traders are not interested in bullish positions
The Tether (USDT) premium on OKX is a good indicator of demand from China-based retail crypto traders. It measures the difference between peer-to-peer (P2P) trading in yuan 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 has been trading at a slight discount on Asian P2P markets since July 4. Not even the 25% rally in total market capitalization between July 13-20 was enough to show excessive buying demand from retail traders. Therefore, these investors continued to leave the cryptocurrency market, seeking refuge in current currencies such as the yuan and the dollar.
Crypto derivatives metrics need to be analyzed to exclude stablecoin market-specific externalities. For example, perpetual contracts have an implied rate that is typically charged every eight hours. Exchanges use this rate to avoid currency risk imbalances.
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.
Derivatives contracts show modest demand for long leveraged (bullish) positions in Bitcoin, Ether and Cardano. Still, nothing is out of the ordinary after 0.15% weekly funding equates to 0.6% monthly cost, so not much changes. The opposite move occurred in Solana, XRP, and Ether Classic (ETC), but not enough to worry about.
As investors’ attention shifts to global macroeconomic data and the Fed’s response to weakening conditions, the window of opportunity for cryptocurrencies to prove a strong alternative shrinks.
Cryptocurrency traders are signaling fear and a lack of leverage buying, even in the face of a 67% correction from the November 2021 peak. Overall, derivatives and stablecoin data show a lack of confidence in support from the market capitalization of one trillion dollars.
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