Altcoin prices briefly rebounded, but derivatives metrics predict worsening conditions

The total crypto market capitalization fell to its lowest point in 10 months on May 12 and continues to test the $1.23 Trillion support level. The following seven days were calm, with Bitcoin (BTC), increasing 3.4%, and Ether (ETH), adding a modest 1.5%. The total crypto cap is currently at $1.31 trillion.

Market cap total for crypto, USD billion Source: TradingView

The decentralized finance industry and crypto markets continue to be affected by the ripples from Terra’s (LUNA), collapse. The recent fall in traditional markets has resulted in a $7.6 trillion market cap loss from the Nasdaq Stock Market Index. This is more than the dotcom bubble and the March 2020 selloffs.

Jerome Powell, Chairman of the U.S. Federal Reserve, confirmed on May 17 that they intend to lower inflation by raising interest rates. However, he warned that tightening Fed policy could have an impact on the unemployment rate.

The bearish sentiment reached crypto markets and the “Fear and Greed Index,” which is a data-driven sentiment gauge, was at 8/100 on May 17. This is the metric’s lowest value since March 28, 2020. It was two weeks after the generalized crash which sent oil futures down to negative levels and brought Bitcoin below $4,000.

Here are the winners as well as losers for the past seven days. The gains were modest for the top cryptocurrencies, but a few mid-capitalization altcoins saw significant gains of 15% or more.

Weekly winners and losers from the top 80 coins Source: Nomics

Monero (XMR), which rallied 22%, was awaiting the implementation of “tail emission” at block 2,641,623, or around June 4. So that miners can not rely solely on transaction fees, the community agreed to include a 0.6 XMR minimum rewards in each block.

Cosmos (ATOM), which gained 16.5%, seems to be part of a larger retracement that began on May 12, when ATOM dropped to $8. According to Cointelegraph, Cosmos Hub, its parent chain, saw massive capital outflows through its liquidity pools.

Klaytn (KLAY), a blockchain-backed South Korean internet giant Kakao announced that it would provide infrastructure and initial nodes and create early use cases for Blockchain-based Service Networks (BSN) to allow entry into China.

Tether Premium shows some discomfort

The OKXTether (USDT premium) is a useful indicator of China-based retail traders crypto demand. It measures the difference in peer-to-peer (P2P), China-based trades, and the United States Dollar.

The indicator’s fair value is at least 100%. In bearish markets, Tether market offer floods and the Tether indicator suffers a 4% discount.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

The Tether premium reached 5.4% on May 12th, its highest level for more than six months. However, the movement could have been due to massive Terra ecosystem outflows that were primarily the USD Terra (UST stablecoin).

Recent data showed that the indicator had a slight decline and currently has a discount of 1.8%. The fact that the cryptocurrency market capitalization has lost 34% over the past month is not particularly concerning.

Futures of ltcoin reflect disinterest in leverage

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.

Rate of accrued perpetual futures funding on May 20. Source: Coinglass

Mixed sentiment is evident in perpetual contracts. While Bitcoin and Ethereum have a slightly positive funding rate (bullish), altcoins indicate the opposite. Solana’s (SOL), negative 0.35% weekly rate is 1.5% per month which isn’t a concern for most derivatives traders.

As the total crypto market capitalization fights for $1.23 trillion, the indicators of derivatives are not showing much improvement. This indicates that investors don’t trust the system. The odds of an adverse price move remain high unless this sentiment improves.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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