Prices for BTC, ETH and altcoins have declined this week, but the futures funding rate shows that retailers are not ready to become permanent bears.
The cryptocurrency market plummeted this week after Coinbase, the top US exchange, posted a quarterly net loss of $430 million and South Korea announced plans to impose a 20 percent tax on cryptocurrency profits.
At its worst, the total market capitalization of cryptocurrencies fell 39% from $1.81 trillion to $1.10 trillion in seven days, an impressive correction even for a volatile asset class. An equally significant drop in valuation was last seen in February 2021, leading to trades for those who take risks.
Total capitalization of the crypto market, billion US dollars. Source: Trading View
Despite the volatility this week, there have been some bursts of relief as bitcoin (BTC) surged 18% from a low of $25,400 to its current $30,000 level, and the price of Ether (ETH) also made a brief rally to $2,100 after as it fell to the annual level. minimum 1700 dollars.
According to Purpose Bitcoin ETF data, institutional investors bought the dip. The exchange-traded instrument is listed in Canada and added 6,903 BTC on May 12, making it the largest one-day buy-in ever.
On May 12, US Treasury Secretary Janet Yellen said that the stablecoin market does not pose a threat to the country’s financial stability. At a House Financial Services Committee hearing, Yellen added:
“They present the same risks that we have known about banking for centuries.”
Total crypto cap down 19.8% in seven days
The combined market capitalization of all cryptocurrencies has decreased by 19.8% over the past seven days and currently stands at $1.4 trillion. However, some mid-cap altcoins have been wiped out, dropping over 45% in a week.
Below are the leaders and losers among the top 80 cryptocurrencies by market cap.
Weekly winners and losers among the top 80 coins. Source: nomix
Maker (MKR) benefited from the demise of the competing algorithmic stablecoin. While TerraUSD (UST) succumbed to the market downturn and broke its peg well below $1, Dai (DAI) remained fully operational.
Terra (LUNA) faced a stunning 100% drop after the fund in charge of managing the ecosystem reserve was forced to sell its bitcoin position at a loss and issue trillions of LUNA tokens to offset the disruption of its sub-$1 stablecoin.
Fantom (FTM) also experienced a 15.3% one-day drop in total locked value, the number of FTM coins deposited in ecosystem smart contracts. Fantom has been in trouble since famed Fantom Foundation team members Andre Cronje and Anton Nell left the project.
Tether Premium Shows Falling Demand From Retailers
The OKX Tether (USDT) premium indirectly measures the demand for cryptocurrency from retailers in China. It measures the difference between China’s peer-to-peer USDT trading and the official US dollar.
Excessive consumer demand drives the figure above fair value, which is 100%. On the other hand, Tether’s market supply overflows during market downturns, resulting in a discount of 2% or more.
Tether (USDT) between peers and USD/CNY. Source: OKH
The Tether premium is currently 101.3%, which is slightly positive. In addition, there was no panic in the last two weeks. Such data suggests that retail demand in Asia is not declining, which is optimistic given that the total capitalization of the cryptocurrency has decreased by 19.8% over the past seven days.
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Altcoin funding rates have also fallen to alarming levels. Perpetual contracts (reverse swaps) have an embedded rate that is usually calculated every eight hours. These instruments are the preferred derivatives of retail traders as their price tends to perfectly replicate conventional spot markets.
Exchanges use this fee to avoid currency risk imbalance. A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite occurs, where short sellers (sellers) require additional leverage, making the funding rate negative.
7 day cumulative