Home CryptocurrencyAltcoin Total cryptocurrency market cap shows strength even after merger and Federal Reserve rate hike

Total cryptocurrency market cap shows strength even after merger and Federal Reserve rate hike

by SuperiorInvest

Cryptocurrencies have been in a bearish trend since mid-August after failing to break through the $1.2 trillion market cap resistance. Even with the current bearish trend and the brutal 25% correction, it was not enough to break the 3-month-long uptrend.

Aggregate crypto market capitalization fell 7.2% to $920 billion in the 7 days prior to September 21st. Investors wanted to play it safe ahead of the Federal Open Market Committee meeting, which decided to raise interest rates by 0.75%.

Total cryptocurrency market capitalization, USD billion. Source: TradingView

By raising the cost of borrowing cash, the monetary authority seeks to limit inflationary pressures while increasing the burden on consumer finances and corporate debt. This explains why investors have moved away from risky assets, including stock markets, foreign currencies, commodities and cryptocurrencies. For example, WTI crude oil prices have advanced 6.8% since September 14, and the MSCI China stock market index has fallen 5.1%.

ether (ETH) also saw a 17.3% return over a 7-day period, and many altcoins fared even worse. The Ethereum network Merge and its subsequent impact on other GPU mineable coins caused some skewed results among the worst weekly results.

Weekly winners and losers among the top 80 coins. Source: Nomics

Chiliz (CHZ) is up 21.5% following two successful launches of fan tokens from the MIBR esports team and the VASCO soccer team from Brazil.

XRP gained 16.6% after Ripple Labs urged a federal judge to immediately rule on whether the company’s sale of XRP tokens violates US securities laws.

ApeCoin (APE) gained 15% as the community anticipates the launch of a staking program that will detailed by Horizen Labs on September 22.

RavenCoin (RVN) and Ethereum Classic (ETC) retraced most of their gains from the previous week as investors realized that hashrate gains from Ethereum miners did not necessarily translate into higher adoption.

Traders’ appetite did not disappear despite the correction

Tether OKX (USDT) premium is a good measure of demand from retail cryptocurrency traders in China. It measures the difference between peer-to-peer trades in China and the US dollar.

Excessive buying demand tends to push the indicator above the fair value of 100%, and during bear markets, the market supply of Tether is flooded, causing a discount of 4% or more.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

The Tether premium is currently at 100.7%, the highest level since June 15th. Although the indicator is still below the neutral zone, it has shown a slight improvement over the past week. With crypto markets down 7.2%, this data should be considered a victory.

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 rate risk imbalances.

A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite occurs when shorts (sellers) require additional leverage, causing the funding rate to go negative.

Cumulative Perpetual Futures Funding Rate September 21 Source: Coinglass

As shown above, the accumulated 7-day funding rate was negative for each altcoin. This data suggests excessive demand for shorts (sellers), although it could be negated in the case of Ether, as investors seeking free fork coins during the merger likely bought ETH and sold futures contracts to hedge the position.

More importantly, Bitcoin’s funding rate remained slightly positive during a week of price declines and potentially bearish news from the Fed. Now that this major decision has been made, investors tend to shy away from new bets until some new data provides insight into how the economy is adjusting.

Overall, Tether premiums and futures funding rates show no signs of stress, which is positive given how poorly crypto markets have performed.

The views and opinions expressed here are solely the opinions author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step involves risk. You should do your own research when deciding.

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