Total crypto market capitalization fell 24% between November 8 and 10 to a low of $770 billion. However, after the initial panic was buried and forced liquidation futures contracts no longer pressured asset prices, a sharp 16% pullback followed.
This week’s decline was not the first rodeo of the stock market below the $850 billion market cap level, and a similar pattern emerged in June and July. In both cases, support showed strength, but the $770 billion low on November 9 was the lowest since December 2020.
The weekly drop of 17.6% in the total market capitalization was mainly affected by the loss of 18.3% of Bitcoin (BTC) and the negative price movement of Ether (ETH) of 22.6%. Still, the price impact on altcoins was more severe, with 8 of the top 80 coins losing 30% or more over the period.
FTX Token (FTT) and Solana (SOL) were strongly affected by the liquidation following the insolvency of the FTX exchange and Alameda Research.
Aptos (APT) fell 33% though deny the rumours that the treasures of Aptos Labs or the Aptos Foundation have been taken over by FTX.
Stablecoin demand in Asia remained neutral
Premium USD Coin (USDC) is a good measure of China-based cryptocurrency trading demand. It measures the difference between peer-to-peer trading in China and the US dollar.
Increased buying demand tends to push the token above the fair value of 100% and during bear markets, the stablecoin market supply fluctuates, causing a discount of 4% or more.
Currently, the USDC premium stands at 100.8% compared to last week. Therefore, despite a 24% decrease in the total capital of the crypto market, panic selling did not occur from Asian retail investors.
However, this data should not be considered bullish, as the USDC buying pressure suggests that traders are seeking shelter in stablecoins.
Few leveraged traders use futures markets
Perpetual contracts, also known as reverse swaps, typically have a fixed rate every eight hours. Exchanges use this fee to offset the exchange risk.
A positive fund ratio indicates that longs (buyers) want more power. However, the opposite situation occurs when short sellers (sales) require additional collateral, which causes the financing ratio to become negative.
As shown above, the 7-day financial ratio for the two largest cryptocurrencies is slightly negative and the data indicates an increased demand for shorts (sellers). Although there is a 0.40% weekly fee to maintain open positions, it is not a concern.
Traders should also analyze the options markets to understand whether traders and arbitrage tables are placing higher bets on bullish or bearish strategies.
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The setting options/call rate shows which makes the feeling worse
Traders can gauge overall market sentiment by whether more activity is going through call options (buying) or put options (selling). In general, call options are used for advanced strategies, while put options are for bearish ones.
The 0.70-advance ratio indicates that open interest options are trailing more than 30% of calls and are therefore bullish. In contrast, a 1.20 indicator protects about 20% of the put options, which can be considered quantitative.
As the price of Bitcoin broke below $18,500 on November 8, investors were quick to seek downside protection. As a result, the hit-to-call ratio then reached 0.65. Still, the Bitcoin options market remains stronger than neutral-to-bearish strategies, as indicated by the current level of 0.63.
Lack of demand for stablecoins in Asia and persistently negative contract premiums, it is clear that traders are not comfortable that the support of the $850 billion market capitalization will be taken any time soon.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move has a risk, you should do your research when making a decision.