Despite the recent flood of negative news about crypto and the economy in general, the Total market capitalization of cryptocurrencies has exceeded $1 trillion. An encouraging sign, especially considering that at the moment the parameters of derivatives do not show an increase in demand from bear traders.
Bitcoin (BTC) price gained 8% from last week, stabilizing at around $23,000 as markets weigh in on the potential impact of Genesis Capital’s bankruptcy.
What is most concerning is the fact that Genesis Capital’s largest debtor is Digital Currency Group (DCG), its parent company. Consequently Fund manager Grayscale, another DCG subsidiary, could also be at risk: Investors fear $14 billion Grayscale Bitcoin Trust (GBTC) may be liquidated.
Also Read: Grayscale CEO: SEC’s “one-sided” approach slows Bitcoin’s progress
Further uncertainties come from South Korea, where prosecutors have requested a arrest warrant for Kang Jong-Hyun, owner of the Bithumb exchange. On January 25, the Second Financial Investigation Division of the South District Prosecutor’s Office in Seoul charged Kang and two other Bithumb executives with conducting fraudulent transactions.
The 7% weekly increase in the total market capitalization was partially held back by the negative 0.3% movement of Ether (ETH). However, the bullish sentiment has had a significant impact on other altcoins: 11 of the top 80 assets have gained 18% or more in this period.
fit (APT) gained 91% after the smart contract network’s TVL hit a record $58 million, thanks to DEX PancakeSwap. Phantom (FTM) surged 50% after announcing its new database system, Carmen, and a new Fantom Virtual Machine, Tosca. Excellent results also for Optimism (OP)up 21% after a strong increase in volumes thanks to an NFT incentive program, called Optimism Quest.
Leverage favors the bulls slightly
Perpetual contracts, also known as inverse swaps, have a built-in fee usually charged every eight hours. Exchanges use this fee to avoid excessive exchange risk imbalances.
A positive funding rate indicates that longs (buyers) require more leverage. The opposite situation – negative funding rate – occurs when the shorts (sellers) ask for additional leverage.
The 7-day funding rate was positive for both Bitcoin and Ethereum: This means slightly higher demand for longs than for shorts. A weekly funding cost of 0.25% is not enough to deter leveraged buyers.
It is interesting to note that Aptos was the only exception, as the altcoin presented a negative weekly funding cost of 0.6%: in other words, short sellers paid to keep their positions open. These figures can be explained by the recent rally of 91% in 7 days – traders are expecting an imminent technical correction.
The put-call ratio shows little fear in the market
Traders can gauge overall market sentiment by measuring whether there is more activity in call (buy) or put (sell) options. In general, call options are used for bullish strategies, while put options are for bearish strategies.
A put-call ratio of 0.70 or lower indicates bullish sentiment among traders; conversely, a value of 1.40 or higher is considered bearish.
While Bitcoin failed to clear the $23,300 resistance, demand for bullish call options outpaced neutral-bearish puts. Currently, the put-call ratio is around 0.50.
There is still a lot of upside potential
After a third straight week of gains – amounting to around 40% year-to-date – there are still no signs of demand from short sellers. More importantly, the data shows that the bulls are not using too much leverage.
Derivatives markets therefore point to further upside potential: even if the overall market cap were to slip below $1 trillion, as happened on January 18, there is no reason to panic. Currently the Bitcoin options markets show whales and market makers who favor neutral-bullish strategies.
Ultimately, the odds favor those betting on a market cap of $1 trillion or higher.
