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The overall market value of cryptocurrencies is approaching $1.25 trillion, but various criteria indicate that regular investors and institutions are not yet prepared to "ape."
A pattern of ascending triangles has pushed the overall market capitalization of cryptocurrencies beyond $1.2 trillion. The problem with this seven-week setup is the waning volatility, which may last until late August. From there, the pattern can break in either direction, but Tether and futures market data indicate that bulls lack the conviction to trigger a break to the upside.
As the United States Federal Reserve (FED) raises interest rates and halts its asset purchase program, investors await more macroeconomic data on the status of the economy with trepidation. The United Kingdom's gross domestic product (GDP) decreased by 0.1% year-over-year on August 12. In July, inflation in the United Kingdom hit 9.4%, the highest level in forty years.
The Chinese real estate market prompted the credit rating firm Fitch Ratings to produce a “special study” on August 7 to estimate the impact of extended turmoil on China’s economy. Analysts anticipate asset management and minor construction and steel-producing firms would be the most affected.
Investors in risky assets are eagerly awaiting a signal from the Federal Reserve and other central banks across the world that the policy of tightening is coming to an end. Conversely, expansionary policies are more advantageous for scarce assets like cryptocurrency.
Since mid-April, investors in cryptocurrencies have been pessimistic due to the risk-averse stance brought on by rising interest rates. Consequently, traders have been afraid to invest in volatile assets and have sought refuge in U.S. Treasuries, despite their yields not compensating for inflation.
The Fear and Greed Index reached 6/100 on June 19, near the record low for this data-driven attitude indicator. In August, however, investors moved away from the “severe fear” rating as the index remained at 30/100. After a four-month-long negative trend, the measure reached the “neutral” zone on August 11.
Below are the seven-day winners and losers as the entire crypto market capitalization grew 2.8% to $1.13 trillion. In contrast to Bitcoin’s (BTC) 2% rise, a few mid-capitalization altcoins rose by 13% or more throughout the period.
After Reuters reported that Ripple Labs was interested in acquiring the insolvent Celsius Network and its assets, the Celsius (CEL) price increased by 97.6%.
After stating on August 8 that it will no longer support the forthcoming Ethereum proof-of-work (PoW) splits that occur during the Merge, Chainlink (LINK) gained 17%.
Avalanche (AVAX) increased by 14.6% after it’s August 8 listing on Robinhood.
Curve DAO (CRV) fell 6% when the Curve.Fi website’s nameserver was hijacked on August 9. The team swiftly resolved the issue. However, the front-end hack resulted in some user losses.
The OKX Tether (USDT) premium is a reliable indicator of demand from China-based retail crypto traders. It quantifies the differential between peer-to-peer (P2P) transactions in China and the U.S. currency.
Excessive purchasing demand tends to push the indicator’s fair value beyond 100%, while in bearish situations, Tether’s market offer is inundated, resulting in a discount of at least 4%.
On August 8, the Tether price on peer-to-peer marketplaces in Asia fell by 2%, indicating modest retail selling pressure. Significantly, the indicator has not improved, although the total capitalization of cryptocurrencies has increased by 9 percent in 10 days, showing lackluster demand from ordinary investors.
To remove Tether-specific externalities, traders must further evaluate futures markets. The embedded rate for perpetual contracts, also known as inverse swaps, is typically charged every eight hours. Exchanges use this charge to prevent exchange risk imbalances.
A positive financing rate shows that longs (buyers) are searching for more leverage. In contrast, the financing rate becomes negative when shorts (sellers) demand extra leverage.
After Bitcoin and Ether maintained a slightly positive (bullish) financing rate, perpetual contracts exhibited a neutral attitude. The existing bull costs are not problematic and have led to an equilibrium between leveraged longs and shorts.
As seen by the Tether discount in Asia and the absence of a positive financing rate in futures markets, derivatives and trading indications suggest that investors are less likely to extend their positions at current levels.
These neutral to negative market signs are concerning considering the seven-week rise in overall crypto market value. The most likely cause is investors’ unease over Chinese real estate markets and more FED tightening moves.
Currently, it is unlikely that the ascending triangle would break beyond the expected $1.25 trillion threshold, but further macroeconomic data is required to determine the likely path of central banks.