The total cryptocurrency market capitalization fell 6.9% over the week, while derivatives performance reflects growing demand for bearish bets.
From a bearish perspective, there is a strong possibility that the crypto market entered a descending channel (or wedge) on August 15 after failing to overcome resistance from a total market capitalization of $1.2 trillion. Although the picture is not yet clear, the last few weeks have not been positive.
Total capitalization of the crypto market, billion US dollars. Source: Trading View
For example, the total market capitalization of $940 billion on August 29 was the lowest in 43 days. The deterioration in conditions was accompanied by a sharp correction in traditional markets, the high-tech Nasdaq Composite index fell 12% since August 15, and even WTI oil prices fell 11% from August 29 to 1% September.
Investors took refuge in the dollar and US Treasuries after Federal Reserve Chairman Jerome Powell reaffirmed the bank’s commitment to curbing inflation by tightening economic policy. As a result, investors profited from riskier assets, pushing the U.S. dollar index (DXY) to 109.6 on Sept. 1, its highest level in two decades. The index measures the strength of the dollar against a basket of major foreign currencies.
More importantly, the regulatory news flow remains largely unfavorable, especially after U.S. federal prosecutors requested internal documents from crypto exchange Binance to look deeper into possible money laundering and attracting U.S. customers. Since late 2020, authorities have been investigating whether Binance has violated the Bank Secrecy Law, according to Reuters.
Crypto investor sentiment returns to the bearish zone
Risk aversion fueled by the Fed’s tightening has left investors anticipating a broader market correction and is negatively impacting gains in equities, commodities and cryptocurrencies.
Cryptocurrency index of fear and greed. Source: Alternative.me
The data-driven fear and greed index peaked on August 14 when the indicator hit a neutral reading of 47/100, which didn’t sound promising either. On September 1, the reading hit 20/100, the lowest reading since 46, and is generally considered bearish.
Below are the winners and losers from the past seven days as total crypto capitalization fell 6.9% to $970 billion. While Bitcoin (BTC) and Ethereum (ETH) are down 7-8%, several mid-cap altcoins are down 13% or more over the period.
Weekly winners and losers among the top 80 coins. Source: nomix
eCash (XEC) surged 16.5% after lead developer Amaury Sechet announced Avalanche’s post-consensus launch on the eCash mainnet, expected on September 14th. The update aims to ensure 1 block completeness and increase protection against 51% attacks.
NEXO added 3.4% after allocating an additional $50 million to its buyback program, giving the company more leeway to buy back its own token on the open market.
Helium (HNT) lost 29.3% after the main developers proposed to abandon their own blockchain in favor of the Solana blockchain. If accepted, HNT, IOT, and MOBILE helium tokens, as well as data credits (DC), will also migrate to the Solana blockchain.
Avalanche (AVAX) stock fell 18.2% after CryptoLeaks released an unconfirmed video of Kyle Roche, partner at Roche Freedman, saying he is selling Solana, one of Avalanche’s key competitors, on behalf of Ava Labs and could file for court.
Most tokens showed negative dynamics, but retail demand in China improved slightly.
OKX Tether (USDT) premium is a good indicator of demand from Chinese crypto traders. It measures the difference between peer-to-peer (P2P) trading in China and the US dollar.
Excessive buying demand tends to drive the indicator 100% above fair value, and during bear markets, Tether’s market supply overflows, leading to a discount of 4% or more.
Tether (USDT) between peers and USD/CNY. Source: OKH
On October 30, the price of Tether surged 0.4% on Asian peer-to-peer markets, the highest level since mid-June. Curiously, this move comes as the total crypto market capitalization has fallen by 18.5% since August 15. The data shows that there were no panicky retail sales.