A bearish formation has been putting pressure on cryptocurrency prices for the past eight weeks, driving total market capitalization to its lowest level in over two months at $1.06 trillion, down 2.4% from 4-7. 11th of June.
This time, the move was not driven by Bitcoin (BTC), as the leading cryptocurrency gained 0.8% over the seven-day period. Negative pressure came from a handful of altcoins that plunged more than 15%, including BNB (BNB), Cardano (ADA), Solana (SUN), Polygon (MATIC) and Polkadot (DOT).
Note that the downtrend started in mid-April has tested the support level multiple times, indicating that an eventual breakout would require additional effort from the bulls.
The United States Securities and Exchange Commission labeled several altcoins as securities in separate lawsuits filed last week against cryptocurrency exchanges Binance and Coinbase.
Despite the worsening crypto regulatory environment, two derivative indicators indicate that the bulls have not yet thrown in the towel, but are likely to find it difficult to break out of the bearish price formation.
Cryptocurrency exchanges are under severe restrictions in the US.
Binance.US announced on June 9 the upcoming suspension of US dollar deposits and withdrawal channels, in addition to delisting US dollar trading pairs. The exchange added that it plans to transition to an exclusively cryptocurrency exchange, but maintains a 1:1 ratio for client assets. The SEC issued an emergency order on June 6 to freeze Binance.US assets.
Also on June 9, the Crypto.com exchange announced that it would stop serving institutional clients in the United States. Although the Singapore-based company claimed a lack of customer demand, the curious coincidence in timing of the recent actions against Coinbase and Binance has raised suspicions, as reflected by UtilizeWeb3 founder CryptoTea.
The SEC will likely sue Crypto .com
they sued Coinbase and Binance for selling securities
specifically naming Solana, Cardano, Sandbox, Matic, CHZ, BNB, Mana, Algo and more
crypto .com also sells ALL of these cryptos
plus they launched their own CRO coin
plus they offer… pic.twitter.com/2nuqd5ljVY— Crypto Tea (@CryptoTea_) June 8, 2023
SEC Likely to Sue Crypto.com
sued Coinbase and Binance for selling securities
specifically naming Solana, Cardano, Sandbox, Matic, CHZ, BNB, Mana, Algo and more
crypto .com also sells ALL these cryptocurrencies
they also launched their own CRO coin
They also offer…
Despite being spared attacks from the SEC, vice leader Ether (ETH) was trading 3.5% lower from June 4-11 after its co-founder Vitalik Buterin declared that the Ethereum network would “fail” if scaling does not take place. In a post on his personal blog on June 9, Buterin explained that Ethereum’s success depends on Layer 2 scaling, wallet security, and privacy preservation.
Derivatives markets show balanced demand for leverage
Perpetual contracts, also known as reverse swaps, have a funding fee that is typically charged every eight hours.
A positive funding rate indicates that the longs (buyers) are demanding more leverage. However, the opposite situation occurs when shorts (sellers) demand more leverage, causing the funding rate to turn negative.
The seven-day funding rate for BTC and ETH was neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts. Curiously, BNB, SOL and ADA did not show excessive shorting after a weekly price decline of 15% or more.
Tether Demand in Asia Shows Modest Resilience
Tether’s cousin (USDT) is a good indicator of demand from China-based retail cryptocurrency traders. 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 to 100%, and during bear markets, Tether’s market supply is flooded, causing a discount of 2% or more.
Currently, the Tether premium on OKX sits at 99.8%, indicating balanced demand from retail investors. Consequently, the indicator shows resistance considering that the cryptocurrency markets fell by 17.7% in the last eight weeks, going from USD 1.29 trillion to USD 1.06 trillion.
Given balanced demand across the funding rate and stablecoin markets, bulls should be more than satisfied, given that the recent regulatory FUD was unable to break the cryptocurrency market cap below $1 trillion.
It is not clear if the market will be able to break the downtrend. Furthermore, there is no apparent reason for bulls to jump in and bet on a V-shaped rally, given the uncertainty in the regulatory environment. Ultimately, the bears are in a comfortable place despite the resistance from derivatives and stablecoin metrics.
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