Total crypto market cap surges to $1.25 trillion, but metrics show retailers and institutions are unwilling to “mimic.”
The formation of an ascending triangle has caused the total cryptocurrency market capitalization to reach the $1.2 trillion level. The problem with this seven-week setup is a drop in volatility that could last into late August. From there, the pattern could break anyway, but data from Tether and the futures markets shows the bulls lack the confidence to catalyze a breakout to the upside.
Total cryptocurrency market capitalization, billion US dollars. Source: Trade View
Investors are cautiously awaiting more macro economic data as the US Federal Reserve (Fed) hikes interest rates and suspends its asset purchase program. On August 12, the UK reported a 0.1% year-on-year fall in gross domestic product (GDP). Meanwhile, UK inflation hit 9.4% in July, a 40-year high.
The Chinese real estate market prompted credit agency Fitch Ratings to issue a “special report” on August 7 to quantify the impact of the ongoing crisis on China’s potentially weaker economy. Analysts expect asset management companies and smaller construction and steel companies to be hit hardest.
In short, investors in risky assets look forward to signals from the Federal Reserve and central banks around the world that tightening is coming to an end. On the other hand, an expansionary policy is more favorable for scarce assets, including cryptocurrencies.
Mood improves to neutral after 4 months
Risk sentiment, driven by rising interest rates, has been falling among cryptocurrency investors since mid-April. As a result, traders were unwilling to invest in volatile assets and sought refuge in US Treasuries even though their gains are not offsetting inflation.
Cryptocurrency Index of Fear and Greed. Source: www.alternative.me
The fear and greed index hit 6/100 on June 19th, which is almost the lowest reading for this data-driven sentiment indicator. However, investors retreated from “extreme fear” in August as the indicator hovered around 30/100. On August 11, the metric finally entered the “neutral” zone after a four-month downtrend.
Below are the winners and losers over the past seven days as total crypto capitalization rose 2.8% to $1.13 trillion. While Bitcoin (BTC) was up just 2%, several mid-cap altcoins were up 13% or more over the period.
Weekly winners and losers among the top 80 coins. Source: Nomix
Celsius (CEL) surged 97.6% after Reuters reported that Ripple Labs had expressed interest in acquiring the Celsius network and its assets, which are currently in bankruptcy.
Chainlink (LINK) is up 17% after announcing on Aug. 8 that it will no longer support upcoming Proof-of-Work (PoW) Ethereum forks occurring during the merger.
Avalanche (AVAX) is up 14.6% after being admitted to trading on Robinhood on Aug. 8.
Curve DAO (CRV) lost 6% after the Curve.Fi website’s name server was compromised on August 9th. The team quickly fixed the issue, but the frontend hack resulted in the loss of some users.
The market may be up, but retailers are neutral
OKX Tether (USDT)’s premium is a good indication of demand from retail crypto traders in China. It measures the difference between peer-to-peer (P2P) transactions in China and the US dollar.
Excessive buying demand tends to push the indicator 100% above fair value, and during bear markets, Tether’s market supply is overwhelmed, resulting in a discount of 4% or more.
Tether (USDT) P2P vs. USD/CNY. Source: OKH
On Aug. 8, Tether’s price fell 2% in Asian peer-to-peer markets, indicating moderate retail selling pressure. More importantly, the metric hasn’t improved while total crypto cap is up 9% in 10 days, indicating weak demand from retail investors.
To rule out external factors specific to the Tether instrument, traders should also analyze the futures markets. Perpetual contracts, also known as reverse swaps, have an embedded 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) are more