On May 30, the total crypto market capitalization gained 4% and is currently within reach of a $1.3 trillion market cap. The move was enough to erase the losses of the previous 7 days and was mainly driven by Bitcoin’s (BTC) gain of 4.9% during that time frame.
Apart from Bitcoin, Cardano (ADA) was the only large-cap cryptocurrency that managed to close the week with a positive return of 4.5%. In the meantime, Ether (ETH), Binance Coin (BNB), XRP (XRP) and Solana (SOL) did not post weekly gains.
Bitcoin’s change of course came after the US stock market posted gains for the first time after 7 consecutive weeks in negative. The longest losing streak in more than a decade for the S&P 500 was followed by a positive return of 6.6% at the closing bell on May 22.
According to Yahoo! Finance, “A favorable run of quarterly results from major retailers helped mitigate, at least temporarily, concerns about the effect of inflation headwinds on profit margins.” For example, Macy’s (M) gained 29.1% for the week, followed by Nordstrom (JWN), with a positive return of 25.4%, and Ross Stores (ROST) up 21.5%.
Curiously, JP Morgan sent a research note to its clients on May 25 stating that $38,000 was the fair value of Bitcoin. The global investment bank also said that the collapse of Terra (LUNA) did not hurt the demand for cryptocurrency venture capital.
On May 23, during the World Economic Forum (WEF) in Davos, Switzerland, the Vice President of PayPal, Richard Nash stated the company’s intention to adopt all possible cryptocurrency and blockchain services. After rolling out its Bitcoin commerce across the United States in 2020, PayPal continues to expand its offering related to digital currencies.
Here are the winners and losers from the last seven days. While major cryptocurrencies saw modest movements, some mid-cap altcoins saw high volatility.
Synthetix (SNX) surged 15.8% after Kwenta, a zero-slip derivatives trading app powered by Synthetix, hit $325 million in volume.
Helium (HNT) gained 15.2% after details of Improvement Proposal #51 were released on May 27. The change introduces a framework to allow subnets with their own token and governance.
STEPN Governance (GMT) lost 14.6% after blocking users based in mainland China on its mobile app.
Terra Luna Classic (LUNC), formerly known as LUNA, was down 12.2% after South Korean authorities summoned all Terraform Labs employees as part of a large-scale investigation.
Due to the mixed performance of the altcoin markets, it is worth investigating how traders position themselves based on trading and derivatives indicators.
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) operations and the US dollar.
Excessive buying demand tends to push the indicator above fair value. On the other hand, during bear markets, Tether’s market supply is flooded, causing a discount of 4% or more.
Between May 23 and May 30, Tether’s premium in CNY terms has averaged a 2% discount, indicating a lack of retail demand. More importantly, the 4% rally in the cryptocurrency market cap on May 30 did not change investor sentiment.
Derivatives indicators are slightly bearish for altcoins
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) demand more leverage. However, the opposite situation occurs when shorts (sellers) demand more leverage, causing the funding rate to turn negative.
Perpetual contracts reflect a mixed sentiment, as Bitcoin and Ether maintained a slightly positive (bullish) funding rate, but altcoins signaled otherwise. For example, Solana’s 0.20% negative weekly rate equates to 0.8% per month, which is irrelevant to most derivatives traders.
The data suggests that investors are not rushing to confirm that the recent rally in prices represents a turnaround. Although the total cryptocurrency market capitalization broke through the $1.3 trillion support, traders are pricing in the increased odds of a drop. So far, there is no clear indication that the market has bottomed based on trading metrics.
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