A 5.5% weekly decline in total cryptocurrency market capitalization may have left some altcoins breathless, but it did little to change traders’ bullish outlook.
The recent weakness in the cryptocurrency market has not invalidated the six-week uptrend, even after a failed test of the upper band of the channel in February. after a new round of negative comments from regulators.
This is great news considering the FUD – fear, uncertainty and doubt – brought down by regulators in regards to the cryptocurrency industry.
Recent examples of bad news include a US District Judge’s ruling that emojis such as the rocket, stock chart, and money bags infer “a financial return on your investment,” according to a recent court filing. On Feb. 22, Judge Victor Marrero ruled against Dapper Labs, refusing to dismiss a claim that its NBA Top Shot Moments violated safety laws by using such emojis to denote profit.
Outside the US, the International Monetary Fund issued guidance on February 23 on how countries should deal with cryptoassets, strongly advising against granting legal status to Bitcoin. The document stated, “While the purported potential benefits of cryptocurrencies have yet to materialize, significant risks have arisen.”
The IMF directors added that “widespread adoption of cryptocurrencies could undermine the effectiveness of monetary policy, circumvent capital flow management measures and exacerbate fiscal risks.” In short, these policy guidelines have created additional FUDs that have caused investors to rethink their exposure to the cryptocurrency sector.
The 5.5% Weekly Drop in Total Market Cap Since Feb. 20 Was Led by Bitcoin’s 6.3% Loss
bitcoins
clicked downwards
$21,606
and ether
ETH
clicked downwards
$1,534
Price drop of 4.6%. As a result, the altcoin correction was even more robust, with nine of the top 80 cryptocurrencies down 15% or more in 7 days.
Fleece
STX extension
clicked downwards
$0.63
gained 53% after the project announced its v2.1 update to strengthen the connection with native Bitcoin assets and improve the control of its smart contracts.
Optimism (OP) rose 13% as the protocol released details of its upcoming superchain network, which focuses on interoperability between blockchains.
Curve (CRV) dropped 21% after an Ethereum security analyst firm suggested implementing verkle tree, which could severely impact the use of Curve Finance on the mainnet, according to his team.
The demand for leverage is balanced despite the price correction
Perpetual contracts, also known as reverse swaps, have a built-in fee 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) ask for additional leverage, causing the funding rate to go negative.
The seven-day funding rate was marginally positive for Bitcoin and Ethereum, hence balanced demand between leveraged longs (buyers) and shorts (sellers). The one exception was the slightly higher demand for BNB lay bets
BNB
clicked downwards
$290
price, even if not significant.
The put/call ratio remains bullish
Traders can gauge overall market sentiment by measuring whether more assets are going through calls (buys) or puts (puts). In general, call options are used for bullish strategies, while put options are used for bearish ones.
A put-call ratio of 0.70 indicates that open puts lag more bullish calls and are therefore positive. Conversely, an indicator of 1.40 favors puts, which can be considered bearish.
Related: “Liquidity” was the biggest hit for the price of Bitcoin last year, according to trader Brian Krogsgard.
Except for a brief moment on February 25, when the price of Bitcoin fell to $22,750, since February 14, the demand for bullish calls has outpaced bearish neutral puts.
The current buy-to-buy volume ratio of 0.65 shows that the Bitcoin options market is more populated by neutral to bullish strategies, favoring call (buy) options by 58%.
