Total cryptocurrency market capitalization gained 2% in the past seven days, reaching $850 billion. Even with the positive move and ascending channel that began on November 20, overall sentiment remains bearish and year-to-date losses stand at 63.5%.
Bitcoin (BTC) price also gained just 2% on the week, but investors have little to celebrate as the current $16,800 level represents a 64% drop year-to-date.
Bankrupt exchange FTX remained at the center of the news flow after the exchange hacker continued to move parts of the stolen $477 million in stolen assets as an attempt to launder money. On November 29, analysts alleged that a portion of the stolen funds was transferred to OKX.
The FTX saga has made politicians shout louder in their calls for regulation. On Nov. 28, European Central Bank (ECB) President Christine Lagarde called cryptocurrency regulation and supervision an “absolute necessity.” US House Financial Services Committee Chair Maxine Waters announced that lawmakers would explore the collapse of FTX in a December 13 inquiry.
On November 28, Kraken, a US-based cryptocurrency exchange, agreed to pay more than $362,000 as part of a settlement “to resolve its potential liability” related to its sanctions violation against Iran. According to the United States Treasury Department’s Office of Foreign Assets Control, Kraken exported services to users who appeared to be in Iran when transacting in virtual currency.
The 2% weekly gain in total market capitalization was mainly affected by the positive 7% price movement of Ether (ETH). Bullish sentiment affected altcoins significantly as well, with 6 of the top 80 coins rallying 10% or more in the period.
Fantom (FTM) gained 29.3% amid reports that the Fantom Foundation generates steady profits and has a 30-year track record of not selling FTM tokens.
Dogecoin (DOGE) rallied 26.8% as investors raised expectations that Elon Musk’s vision for Twitter 2.0 will include some form of DOGE integration.
ApeCoin (APE) gained 15.6% after the community-run DAO made up of ApeCoin holders launched its own marketplace to buy and sell NFTs from the Yuga Labs ecosystem.
Chainlink (LINK) rallied 11.1% ahead of the beta launch of its staking services on Dec. 6, boosting holder reward opportunities.
Leverage demand is balanced between bulls and bears
Perpetual contracts, also known as reverse swaps, have a built-in fee that is typically charged every eight hours. Exchanges use this fee to avoid currency risk imbalances.
A positive funding rate indicates that long buyers require more leverage. However, the opposite situation occurs when short sellers require additional leverage, causing the funding rate to turn negative.
The 7-day funding rate was close to zero for Bitcoin, Ether, and XRP, so the data points to a balanced demand between long (buy) and short (seller) positions for leverage.
The one exception was BNB, which featured a weekly funding rate of 1.3% for those holding leveraged short positions. Although not a burden on sellers, it reflects investors’ concern about buying BNB at current price levels.
Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.
The put/call options ratio shows a moderate uptrend
Traders can gauge overall market sentiment by gauging if there is more activity through call options or put options. Generally speaking, call options are used for bullish strategies while put options are for bearish strategies.
A put-to-call ratio of 0.70 indicates that put option open interest lags the most bullish calls by 30% and is therefore bullish. Conversely, an indicator of 1.20 favors put options by 20%, which can be considered bearish.
Although the Bitcoin price failed to break the $17,000 resistance on Nov. 30, there was no excessive demand for downside protection using options. As a result, the put-to-call ratio held steady near 0.53. The Bitcoin options market continues to be more populated by neutral to bearish strategies, as indicated by the current level favoring call options.
Despite the weekly price rally in select altcoins and even the 7.1% gain in Ether price, there have been no signs of improving sentiment according to derivatives metrics.
There is balanced demand for leverage using futures contracts, and the BTC options risk assessment metric did not improve even as the Bitcoin price tested the $17,000 level.
Currently, the odds favor those who bet on the $870 billion market cap resistance to show strength, but a negative 5% move towards the $810 billion support is not enough to invalidate the ascending channel, which could give the bulls much-needed space to stamp out contagion risks caused by FTX’s insolvency.
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