The Sept. 21 FOMC decision could force traders to de-risk, which would cap recent gains in the crypto market.
A 13% surge in the six days leading up to Sept. 12 brought the total crypto market cap closer to $1.1 trillion, but it wasn’t enough to break the downtrend. As a result, the overall trend has been bearish for the past 55 days, with the last test of support occurring on September 7th at a total market cap of $950 billion.
Total Cryptocurrency Market Cap, USD. Source: Trade View
The improvement in traditional markets has coincided with the recent 13% rally in the cryptocurrency market. The Nasdaq Composite Technology Index is up 6.2% since September 6th, while WTI crude oil prices are up 7.8% since September 7th. This data reinforces the high correlation with traditional assets and underscores the importance of closely monitoring macroeconomic conditions.
The correlation metric ranges from a negative 1, meaning some markets are moving in opposite directions, to a positive 1, indicating perfectly symmetric movement. A mismatch or lack of relationship between the two assets is represented by 0.
Nasdaq futures and 50-day bitcoin/US dollar correlation. Source: Trade View
As shown above, the 50-day correlation of the Nasdaq Composite Index and bitcoin currently stands at 0.74, which was the norm throughout 2022.
The Fed’s September 21 decision will set the tone
Stock market investors are looking forward to the US Federal Reserve meeting on September 21, when the Federal Reserve is expected to raise interest rates again. As the market consensus depicts a third straight rate hike of 0.75 percentage point, investors are looking for signs that economic tightening is easing.
The report on the US CPI, a measure of inflation, is expected on September 13, and on September 15 investors’ attention will turn to data on US retail sales and industrial production.
For now, regulatory sentiment remains largely unfavorable, particularly after Gurbir Grewal, director of enforcement for the U.S. Securities and Exchange Commission (SEC), said the financial regulator would continue to conduct investigations and take enforcement action against crypto firms.
Altcoins rose, but professional traders were resistant to long positions
Here are the winners and losers: The cryptocurrency’s total market cap rose 8.3% last week to $1.08 trillion. Bitcoin (BTC) was up 12.5%, taking its dominance rate to 41.3%, its highest level since Aug. 9.
Weekly winners and losers among the top 80 coins. Source: Nomix
Terra (LUNA) surged 107.7% after Terra approved a proposal on September 9th for an additional giveaway of over 19 million LUNA tokens through October 4th.
RavenCoin (RVN) gained 65.8% after network hash rate hit 5.7 TH per second, the highest since January 2022.
Cosmos (ATOM) gained 24.6% after cryptocurrency R&D research firm Delphi Digital shifted the focus of its R&D arm to the Cosmos ecosystem on Sept. 8.
Even with these successes, one week of positive results is not enough to understand how professional traders are doing. Those interested in tracking whales and market markers should check out the derivatives markets. Perpetual contracts, also known as reverse swaps, have an embedded interest rate that is typically calculated every eight hours. Exchanges use this fee to avoid currency risk imbalance.
A positive funding rate indicates that longs (buyers) need more leverage. However, the opposite occurs when short sellers (sellers) need additional leverage, making the funding rate negative.
Cumulative 7-day funding rate for perpetual futures on September 12th. Source: coin jar.
Perpetual contracts reflected neutral sentiment as the cumulative funding rate remained relatively flat in most cases. The only exceptions were Ethereum (ETH) and Classical Ether (ETC), although the weekly cost of holding a 0.30% short (bearish) position should not be considered reasonable. Furthermore, these cases are likely related to the Ethereum merger, the transition to the Proof-of-Stake network, which is expected on September 15th.