Total Crypto Market Cap Rises Above $1T, And Data Suggests More Upside Is In Store

Bad news Continues to Dominate Crypto media Headlines yet Bitcoin and the more extensive market appear to not care.

Despite the recent negative Crypto and Macroeconomic newsflow, the Total Cryptocurrency Market Capitalization broke above $1 trillion on Jan. 21. An encouraging sign is that derivatives metrics are not showing increased request from bearish traders right now.

Bitcoin price gained 8% on the week, settling close the $23,100 level at 18:00 UTC on Jan. 27 as the markets gauged the potential impact of Genesis Capital’s bankruptcy on Jan. 19.

One area of concern is Genesis Capital’s biggest debtor is Digital Currency Group (DCG), which is its parent company. Consequently, Grayscale funds Management could be at risk, so investors are unsure if the Grayscale Bitcoin Trust (GBTC) assets could confront liquidation. The investment vehicle currently holds more than $14 billion worth of Bitcoin positions for its holders.

A United States appeals court is set to hear the contentions relating to Grayscale Investment’s lawsuit against the Securities and Exchange Commission (SEC) on Walk 8. The asset manager questioned the SEC’s decision to deny their asset-backed exchange-traded reserve (ETF) launch.

Regulatory concerns also negatively impacted the markets after South Korean prosecutors requested an arrest warrant for Bithumb exchange proprietor Kang Jong-Hyun. On Jan. 25, the Financial Investigation second Division of the Seoul Southern District Prosecutor’s Office condemned Kang and two Bithumb executives on charges of conducting fraudulent illegal transactions.

Leverage Demand Slightly Favors Bulls

Perpetual contracts, also known as inverse swaps, have an embedded rate generally charged every eight hours.Inverse swaps have an embedded rate which is charged every eight hours.
Exchanges use this fee to reduce exchange risk.A positive funding rate shows that buyers want more leverage.The funding rate turns negative when shorts require additional leverage.

The 7-day funding rate was positive for Bitcoin and Ethereum, meaning the data focuses to slightly higher demand for leverage longs (buyers) versus shorts (sellers). Still, a 0.25% week after week funding cost isn’t sufficient to discourage leverage buyers.

Interestingly, Aptos was the main exception as the altcoin presented a negative 0.6% week after week funding cost — significance short sellers were paying to keep their positions open. This development can be explained by the 91% rally in 7 days and it suggests that sellers expect some sort of technical correction.

The Options put/call ratio gives no indications of fear

Traders can check the market’s overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally talking, call options are used for bullish strategies, whereas put options are for bearish ones.

A 0.70 put-to-call ratio indicates that put options open interest slack the more bullish calls by 30% and is therefore bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be considered bearish.

Even though Bitcoin’s price failed to break the $23,300 resistance, the demand for bullish call options has exceeded the neutral-to-bear puts since Jan.6.

Presently, the put-to-call volume ratio stands near 0.50 as the options market is more strongly populated by neutral-to-bullish strategies, favoring call (buy) options by half.

Derivatives markets highlight further upside potential

After the third consecutive seven day stretch of gains, which totals 40% year-to-date while excluding stablecoins, there are no indications of demand from short sellers. More critically, leverage indicators show bulls are not utilizing excessive leverage.

Even if the market revisits the $950 billion market cap from January, derivatives markets still point to further upside potential.There is no explanation for the alarm.The neutral-to-bullish strategies are favored by whales and market makers.

Ultimately, the chances favor those wagering that the $1 trillion total market cap will hold, opening space for further gains.