Since mid-August, cryptocurrencies have been stuck in a bear market since they failed to surpass the $1.2 trillion resistance in market capitalization. Despite the bear trend and the 25% correction it took, it was not enough to end the three-month-long ascending trend.
In the seven days preceding Sept. 21, crypto markets’ total capitalization fell 7.2% to $920billion. The Federal Open Markets Committee meeting was a time when investors wanted to be safe. They decided to raise the interest rate by 0.7%.
Source: TradingView Source: TradingView
The monetary authority seeks to reduce inflationary pressure by increasing the cost of borrowing money while increasing corporate debt and consumer finance. Investors have shifted away from risk assets such as stock markets, foreign currencies and cryptocurrencies. WTI oil prices fell 6.8% since Sept. 14 and MSCI China stock markets index fell 5.1%.
The seven-day period saw Ether (ETH) see a 17.3% retrace, and many altcoins did worse. Some of the worst weekly performers were affected by the Ethereum network Merge and its impact on other GPU-mineable currencies.
Weekly winners and losers from the top-80 coins Source: Nomics
Chiliz (CHZ), rallied 21.5% after two successful fan token launches by the MIBR esports team, and the VASCO soccer club from Brazil.
XRP gained 16.6% following Ripple Labs’ request for a federal judge who would immediately rule on whether the company’s XRP token sale violated U.S. Securities laws.
ApeCoin (APE), which gained 15%, is the anticipated launch date for the staking program. Horizen Labs will detail the launch on Sept. 22.
RavenCoin (RVN), and Ethereum Classic (ETC), retraced the majority of their gains from the week before, as investors realized that the Ethereum miners’ hash rate gains did not necessarily translate into higher adoption.
Traders didn’t lose their appetite despite the correction
The OKXTether premium (USDT), is a useful indicator of China-based crypto retail traders demand. It is used to measure the difference between peer-to-peer Chinese trades and the United States Dollar.
An excessive buying demand can push the indicator above its fair value at 100 percent. During bearish markets, Tether’s market offer is flooded and Tether will receive a discount of 4% or more.
Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX
Tether premium is currently at 100.7%, which is its highest level since June 15th. The indicator has shown a slight improvement in the last week, although it is still below the neutral zone. This data should be considered a victory, considering that crypto markets fell by 7.2%.
The embedded rate for perpetual contracts, also called inverse swaps or inverse swaps is charged approximately every eight hours. This fee is used by exchanges to avoid imbalances in exchange risk.
Positive funding rates indicate that buyers (longs) are looking for more leverage. The opposite happens when shorts (sellers), require more leverage. Therefore, the funding rate turns negative.
September 21: Accumulated perpetual forwards funding rate Source: Coinglass
The accumulated daily funding rate for all altcoins was negative, as shown in the above graph. This data suggests that there is excess demand for sellers (shorts), but it can be ignored in Ether’s instance because investors aiming to get free fork coins during Merge likely bought ETH, and then sold futures contracts to hedge their position.
Importantly, Bitcoin’s funding rates remained slightly positive during a week when prices dropped and there was potentially bearish news from FED. Investors tend to hold off on placing new bets until new data is available that provides insight into how the economy will adjust.
The Tether premium and futures funding rate are both stable, which is a positive sign considering the poor performance of crypto markets.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.