Cryptocurrencies have been in a downtrend since mid-August after they failed to break through the $1.2 trillion market cap resistance. Even with the current downtrend and a brutal 25% correction, it has not been enough to break the 3-month uptrend.
The aggregate capitalization of cryptocurrency markets fell 7.2% to $920 billion in the 7 days to Sept. 21. Investors wanted to play it safe before the meeting of the Federal Committee on Open Markets, which decided to increase the interest rate by 0.75%.
By increasing the cost of cash loans, the monetary authority intends to curb inflationary pressures and, at the same time, increase the burden of consumer finance and corporate debt. This explains why investors have moved away from risky assets, including stock markets, currencies, commodities and cryptocurrencies. For example, WTI oil prices are down 6.8% since September 14, and the MSCI China Stock Index is down 5.1%.
Ether (ETH) also saw a 17.3% retracement over the 7-day period with many altcoins doing even worse. The Ethereum network meltdown and its subsequent impact on other GPU minable coins caused some skewed results among the weekly worst performers.
Chiliz (CHZ) is up 21.5% following two successful fan token launches from the MIBR esports team and Brazil’s VASCO soccer team.
XRP gained 16.6% after Ripple Labs asked a federal judge to immediately rule on whether the company’s XRP token sales violated US securities laws.
ApeCoin (APE) gained 15% as the community awaits the launch of the staking program, which will be detailed by Horizen Labs on September 22.
RavenCoin (RVN) and Ethereum Classic (ETC) pulled back most of their gains from the previous week as investors realized that hashrate gains from Ethereum miners were not necessarily translating into higher adoption.
Traders’ appetite did not disappear despite the correction
The OKX Tether (USDT) premium is a good indicator of demand from China-based retail traders. It measures the difference between China-based peer-to-peer trades 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 currently stands at 100.7%, its highest level since June 15. Although still below the neutral zone, the gauge showed modest improvement over the past week. Considering that the cryptocurrency markets sank 7.2%, this data should be considered a victory.
Perpetual contracts, also known as reverse swaps, 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 additional leverage, causing the funding rate to turn negative.
As shown above, the 7-day cumulative funding rate was negative for all altcoins. This data indicates excess demand for shorts (sellers), although it could be ruled out in the case of Ether because investors aiming for free fork coins during the merger likely bought ETH and sold futures contracts to hedge the position.
Most importantly, Bitcoin’s funding rate remained slightly positive during a week of falling prices and potentially bearish news from the FED. Now that this critical decision has been made, investors tend to avoid placing any 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 a positive considering how poorly the crypto markets have performed.
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