Bitcoin and altcoins are on the upside, but upcoming macro events may limit the upside

The 13% increase in the six days leading up to September 12 brought the total crypto market cap closer to $1.1 trillion, but this was not enough to break the downward trend. As a result, the overall trend over the past 55 days has been bearish, with the last support test on September 7 at a total market cap of $950 billion.

An improvement in traditional markets has followed the recent 13% crypto market rally. The technology-heavy Nasdaq Composite Index rose 6.2% since September 6 and the WTI oil price rose 7.8% since September 7. This data reinforces the high correlation versus traditional assets and highlights the importance of closely monitoring macroeconomic conditions.

The correlation calculation ranges from a negative 1, which means that selected markets move in opposite directions, to a positive 1, which reflects a perfectly symmetrical movement. A difference or lack of relationship between the two assets will be represented by 0.

As shown above, the Nasdaq Composite Index and Bitcoin 50-day correlation currently stands at 0.74, which has been the norm through 2022.

The Fed’s decision on September 21 will set the mood

Equity investors are anxiously awaiting the meeting of the US central bank on 21 September, where the central bank is expected to raise interest rates again. While the market consensus is for a third consecutive 0.75 percentage point rate hike, investors are looking for signs that economic tightening is fading.

A report on the US consumer price index, a relevant measure of inflation, is expected on September 13 and 15, investor attention will be glued to US retail sales and industrial production data.

For now, regulatory sentiment remains largely unfavorable, especially after United States Securities and Exchange Commission (SEC) Director of Enforcement Gurbir Grewal said the financial regulator will continue to investigate and take enforcement action against crypto firms.

Altcoins rallied, but pro-traders were resistant to capitalizing on longs

Below are the winners and losers of last week’s total crypto market cap of 8.3% gain to $1.08 trillion. Bitcoin (BTC) stood out with a 12.5% ​​gain, bringing its dominance rate to 41.3%, the highest since August 9.

Terra (LUNA) jumped 107.7% after Terra approved a proposal on September 9th for an additional airdrop of over 19 million LUNA tokens until October 4th.

RavenCoin (RVN) surged 65.8% after the network hash rate reached 5.7 TH per second, the highest level since January 2022.

Cosmos (ATOM) gained 24.6% after Crypto research firm Delphi Digital shifted the focus of its research and development arm to the Cosmos ecosystem on September 8.

Even with these gains, a single week of positive performance is not enough to interpret how professional traders are positioned. Those interested in tracking whales and market markers should analyze derivatives markets. 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.

Perpetual contracts reflected a neutral sentiment as the accumulated funding rate was relatively flat in most cases. The only exceptions have been Ether (ETH) and Ether Classic (ETC), although a weekly cost of 0.30% to maintain a short (bear) position should not be considered relevant. Moreover, these cases are likely related to the Ethereum merger, the transition to a proof-of-stake network expected on September 15.

Related: Glimpses of positive momentum in a generally bearish market? Report

The odds of a downward trend are still high

The positive weekly performance of 8.3% cannot be considered a trend change considering that the move was probably linked to the rise in traditional markets. Furthermore, one can assume that investors are likely to price in the risk of further regulatory impact following Gary Gensler’s remarks.

Uncertainty remains about potential macroeconomic triggers and traders are unlikely to add risk ahead of key events such as the FOMC interest rate decision. For this reason, 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, another sign of negative investor sentiment. If the total crypto market capitalization tests the bearish pattern support level of $940 million, traders should expect a 12.5% ​​price drop from the current level of $1.08 billion.

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.