A 13% gain in the six days to September 12 brought the total crypto market capitalization closer to $1.1 trillion, but it was not enough to break the descending trend. As a result, the overall trend for the past 55 days has been bearish, with the latest support testing on September 7 with a total market cap of $950 billion.
Traditional markets have corrected with the recent 13% crypto market rally. The tech-heavy Nasdaq Composite Index is up 6.2% since September 6, and WTI oil prices are up 7.8% since September 7. This data reinforces the high correlation compared to traditional assets and puts a spotlight on the importance of closely monitoring macroeconomic conditions.
The correlation metric ranges from a negative 1, meaning that select markets move in opposite directions to a positive 1, indicating perfectly symmetrical movement. The inequality or lack of relationship between the two properties will be denoted by 0.
As shown above, the 50-day correlation between the Nasdaq Composite Index and Bitcoin is currently at 0.74, which has been the norm throughout 2022.
FED’s September 21 decision will set the mood
Stock market investors are eagerly awaiting the US Federal Reserve meeting on September 21, where the central bank is expected to raise interest rates again. While the market consensus is 0.75 per cent growth for the third time in a row, investors are seeing signs that the economic crunch is easing.
A report on the US Consumer Price Index, a relevant inflation metric, is expected on September 13 and on September 15, investors’ attention will be on US retail sales and industrial production data.
Currently, regulatory sentiment remains largely unfavourable, especially with the United States Securities and Exchange Commission (SEC) Enforcement Director Gurbir Grewal stating that the financial regulator will continue to take investigation and enforcement action against crypto firms.
Altcoins rally, but pro traders resilient to long-term leverage
Below are the winners and losers of last week’s total crypto market capitalization with 8.3% gains to $1.08 trillion. Bitcoin (BTC) rallied with a gain of 12.5%, causing its dominance rate to reach 41.3%, the highest level since Aug. 9.
Terra (LUNA) jumped 107.7% when Terra approved a proposal on 9 September. For an additional airdrop of over 19 million LUNA tokens as of October 4.
Ravencoin (RVN) increased by 65.8% after the network hash rate reached 5.7 TH per second, the highest level since January 2022.
Cosmos (ATOM) gained 24.6% on September 8 after crypto research firm Delphi Digital focused its research and development arm on the Cosmos ecosystem.
Even with these advantages, a week of positive exposure is not enough to explain the position of professional traders. Those interested in tracking whales and market markers should analyze the derivatives market. Perpetual contracts, also known as inverse swaps, have an embedded rate that is typically charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.
A positive funding rate indicates that longs (buyers) are seeking more leverage. However, the opposite occurs when shorts (sellers) require additional leverage, turning the funding rate negative.
Perpetual contracts reflect a neutral sentiment as the accumulated money rate was relatively flat in most cases. The only exceptions are Ether (ETH) and Ether Classic (ETC), even though the 0.30% weekly cost to maintain a short (bear) position should not be considered relevant. Furthermore, those cases are likely to be related to the Ethereum merge, with the transition to a proof-of-stake network expected for September 15th.
related: A glimpse of positive momentum in an overall bearish market? report
Downtrend likely still high
A positive 8.3% weekly performance cannot be considered a trend change, given that the move was linked to a recovery in traditional markets. Furthermore, one can assume that investors may have to pay the price of the risk of additional regulatory impact following Gary Gensler’s remarks.
There is still uncertainty over potential macroeconomic triggers and traders are unlikely to add risk ahead of important events such as the FOMC interest rate decision. For this reason, the bears have reason to believe that the prevailing long-term descending formation will resume in the coming weeks.
Professional traders’ lack of interest in leveraged longs is evident in the neutral futures funding rate and is another sign of negative investor sentiment. If the crypto total market capitalization tests the support level of the bearish pattern at $940 million, traders should expect a decline of 12.5% from the current $1.08 billion level.
The views and opinions expressed here are those of Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
