2 metrics signal that $1T crypto market value support likely won’t last
Cryptocurrencies breached the $1 trillion market cap resistance on October 26, which had held strong for the past 41 days. Despite Bitcoin’s (BTC) modest 5.5% weekly gains, the combined value of 20,000 listed tokens increased by 8.5% between October 24th and 31st.
The cryptocurrency market was positively impacted by a 6.3% weekly rally in the Russell 2000 mid-cap stock market index. Some encouraging news accompanied the positive tailwind from traditional markets.
For example, 55,000 BTC was withdrawn from Binance on October 26, a record high. Generally, analysts consider the reduced number of coins deposited on exchanges as a bullish indicator, as the immediate selling pressure subsides.
Furthermore, exchange and wallet provider Blockchain.com partnered with payment processing giant Visa to launch a crypto card. The cryptocurrency company revealed on October 26 that there would be no registration or annual fees, no transaction fees and users would earn 1% of all purchases back in digital assets.
Instead of focusing on Bitcoin, cryptocurrency traders have spread their bets across altcoins. Comparing winners and losers among the top 80 coins is therefore skewed, as seven have rallied 20% or more in the past week.
Dogecoin (DOGE) surged 112% after Elon Musk, the billionaire CEO of SpaceX and Tesla, completed the acquisition of social media network Twitter. Musk’s known passion for memecoin inspired traders to raise expectations for potential payment integrations.
The Mina protocol’s MINA token surged 28% following its ecosystem update report on October 27, which highlighted the zero-knowledge testnet. The protocol promises efficient layer-1 smart contract zkApps, which add unique privacy features and the ability to connect to external data sources.
The native tokens of smart contract networks Klaytn, Cosmos, and Avalanche — KLAY, ATOM (ATOM), and AVAX (AVAX), respectively — rallied after Ether’s (ETH) 16.5% gain. Also, the Ethereum network has remained clogged, with average transaction fees above $3 for the past three weeks.
Stablecoin demand remained neutral in Asia
The USD Coin (USDC) premium is a good measure of China-based crypto traders’ demand. It measures the difference between China-based peer-to-peer trades and the US dollar.
Excessive buying demand tends to push the indicator above fair value of 100%, and during bearish markets, the stablecoin’s market supply is flooded, causing a discount of 4% or higher.
Currently, the USDC premium is 100.8%, flat compared to last week. Therefore, despite the 8.5% rise in cryptocurrency market capitalization, there was no further demand from Asian retail investors. However, such data should not be alarming, as it partly reflects the fact that total capitalization is down 56% so far this year.
Futures markets show mixed sentiment
Perpetual contracts, also known as inverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use this fee to avoid imbalances in currency risk.
A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to become negative.
As shown above, the cumulative seven-day funding rate is either slightly positive or neutral for the major cryptocurrencies by open interest. Such data indicate a balanced demand between leverage longs (buyers) and shorts (sellers).
Considering the absence of stablecoin demand in Asia and mixed perpetual contract premiums, traders lack confidence even though the total crypto capitalization broke above $1 trillion.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade involves risk. You should do your own research when making a decision.
