Data shows Bitcoin and altcoins at risk of a 20% drop to new yearly lows

After the breaking of the rising wedge formation on Aug. 17, crypto market capitalization dropped quickly to $1 trillion. The bulls’ hope of recouping $1.2 trillion support, last seen June 10, became even less likely.

Market cap total for crypto, USD billion Source: TradingView

These worsening conditions do not only affect crypto markets. WTI oil prices fell 28% to 3.6% on August 22, 28% below the June 8 peak of $122 The 5-year United StatesTreasuries yield on WTI oil, which was at 2.61% at its bottom, reversed the trend, and now trades at 3.16%. All these signs indicate that investors are less confident in the central bank’s policy of asking for more money to keep those debt instruments.

David Kostin, Goldman Sachs’ chief U.S. equity strategist, stated recently that the S&P 500 has a risk-reward ratio that is biased to the downside following a 17% rally from mid-June. Kostin wrote in a client note that if inflation surprises to the upside, the U.S. Federal Reserve would need to tighten its economy more aggressively. This could negatively impact valuations.

Extended lockdowns supposedly aimed to contain the spread of COVID-19 and property debt problems in China caused the PBOC to lower its five-year loan rate to 4.30%, from 4.45% on August 21. Curiously, this surprising move came a week after China’s central bank had lowered interest rates.

The edge of “neutral-to bearish” crypto investor sentiment is evident

Investors were more cautious about taking on inflation, and they expected interest rate increases. This will reduce investors’ desire to invest in growth stocks, commodities, and cryptocurrencies. In times of uncertainty, traders will seek refuge in the U.S. Dollar and inflation-protected bonds.

Crypto Fear & Greed Index. Source: Alternative.me

On Aug. 21, the Fear and Greed Index reached 27/100, which is the lowest reading in over 30 days. This move confirms that investors are less optimistic than the neutral 44/100 reading they received on Aug. 16. It also reflects traders’ fear of the short-term price action in the crypto market.

Here are the winners as well as losers of the last seven days, when the total crypto capitalization fell 12.6% to $1.04 Trillion. Bitcoin (BTC), which saw a decline of 12%, was outperformed by a few mid-capitalization altcoins that dropped 23% or more during the same period.

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

EOS surged 34.4% following a bullish turn by its community regarding the September “Mandel” hardfork. This update will likely end Block.one’s relationship.

Chiliz (CHZ), 2.6%, after Socios.com invested $100 Million for a 25% stake at the Barcelona Football Club’s digital and entertainment arm.

Celsius (CEL), fell 43.8% following a bankruptcy filing report dated Aug. 14, which showed a $2.85 Billion funds mismatch.

While most tokens performed poorly, China’s retail demand slightly improved.

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

An excessive buying demand can push the indicator over fair value at 100 percent. During bearish markets, Tether’s market offer floods and results in a 4% discount.

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

The Tether price in Asia’s peer-to-peer market reached its highest level in 2 months on Aug 21. It is currently at 0.5% discount. The index is still below the neutral-to bearish range which indicates low retail demand.

Futures markets must be analyzed by traders to eliminate externalities that are not related to the Tether instrument. The embedded rate for perpetual contracts, also called inverse swaps or tether instruments, is usually charged once 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.

On Aug. 22, the accrued perpetual futures funding rate was Source: Coinglass

After Ether and Bitcoin had a flat funding rate, perpetual contracts reflect a neutral sentiment. Current fees were based on a balanced position between leveraged shorts and longs.

The remaining altcoins were not discouraged by the 0.40% weekly Negative Funding Rate for Ether Classic (ETC).

A 20% drop in annual lows to be retested is possible

Investors are somewhat concerned about a sharper global market correction, according to trading indicators and derivatives. Tether’s slight discount in Chinese Yuan when priced in Tether and the near-zero funding rate seen in futures markets are both signs of a lack of buyers.

These market indicators that are neutral-to-bearish are concerning, as total crypto capitalization is currently testing $1 trillion support. The odds of crypto retesting the $800 billion annual lows are high if the U.S. Federal Reserve continues to tighten its economy to suppress inflation.

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

2021's Most Anticipated Growth & Wealth-Building Opportunity

Join Thousands of Early Adopters Just Like You Who Want to Grow Capital and Truly Understand Cryptocurrency Together

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 topmagazinewire.com 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.

Close Bitnami banner
Bitnami