The total market cap of the crypto market has fallen to $1 trillion support, and weak demand for stablecoins and a virtually non-existent funding rate reflect negative trader sentiment.
After the rising wedge was broken on August 17, the cryptocurrency’s total market cap quickly fell to $1 trillion, and the bulls’ dream, which was last seen on August 10.
Total cryptocurrency market capitalization, billion US dollars. Source: Trade View
Deteriorating conditions are not unique to the cryptocurrency markets. The price of WTI oil fell 3.6% on Aug. 22, down 28% from its peak of $122 on June 8, down 3.16%. All of these are signs that investors have less confidence in the central bank’s policy of charging more money to hold these debt instruments.
Recently, Goldman Sachs chief US equity strategist David Kostin said the risk return for the S&P 500 is trending down after a 17 percent rise since mid-June. According to a note to clients Kostin authored, inflation surprises will force the Federal Reserve to tighten the economy more aggressively, hurting valuations.
Meanwhile, prolonged lockdowns believed to be aimed at curbing the spread of COVID-19 in China and problems with housing debt forced the NBK to lower the base rate on a five-year loan from 4.45% on August 21 4.30% lower. Curiously, the move came a week after the People’s Bank of China unexpectedly cut interest rates.
Crypto Investor Sentiment is on the Verge of Neutral-Bearish
Risk appetite fueled by rising inflation has led investors to anticipate further rate hikes, which in turn will dampen investor appetites for rising stocks, commodities and cryptocurrencies. As a result, traders are more likely to seek refuge in US dollars and inflation-linked bonds during uncertain times.
Cryptocurrency Index of Fear and Greed. Source: Alternative.me
The fear and greed index hit 27/100 on August 21, the lowest level in 30 days for this data-driven sentiment indicator. The move confirmed that investor sentiment moved away from the neutral 44/100 on Aug. 16 and reflects the fact that traders are relatively skeptical about short-term price moves in the cryptocurrency market.
Below are the winners and losers over the past seven days as total crypto capitalization fell 12.6% to $1.04 trillion. While Bitcoin (BTC) was down 12%, several mid-cap altcoins fell 23% or more over the period.
Weekly winners and losers among the top 80 coins. Source: Nomix
EOS surged 34.4% after its community was optimistic about the Mandel hard fork scheduled for September. The update is expected to end the relationship with Block.one entirely.
Chiliz (CHZ) shares rose 2.6% after Socios.com invested $100 million to acquire a 25% stake in FC Barcelona’s new digital and entertainment division.
Celsius (CEL) fell 43.8% after the Aug. 14 bankruptcy report revealed a $2.85 billion funding mismatch.
Most tokens showed negative momentum, but retail demand in China improved slightly.
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 pressure the indicator above fair value at 100%, 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. 21, Tether’s price in Asian peer-to-peer markets hit its highest level in two months, currently at a 0.5% discount. However, the index remains neutral to bearish, suggesting low demand from retail buyers.
Traders should also analyze the futures markets to rule out external factors specific to the Tether instrument. 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, reducing the finance