The recent weakness in the crypto market has not reversed the six-week uptrend, even after the failed test of the upper band of the channel on February 21. , is cautiously optimistic after a new round of negative comments from regulators.
As shown above, the upward channel that started in mid-January has room for an additional 3.5% correction to $1.025 trillion in market capitalization while still maintaining a bullish formation.
This is very good news about the FUD – fear, uncertainty and doubt – being dropped by regulators on the cryptocurrency industry.
The latest example of bad news is a United States District Court judge who ruled that emojis such as rocket ships, stock charts and money bags amount to “recession of financial capital,” according to a new court filing. On February 22, a federal court judge ruling on a case against Dapper Labs denied a motion to dismiss a complaint that claimed NBA Top Shot Moments violated security laws by using emojis to show profits.
Outside the US, on February 23, the International Monetary Fund (IMF) issued guidance on how countries should treat crypto assets, strongly recommending against giving Bitcoin legal tender status. The paper states, “while the potential benefits of crypto assets have yet to materialize, significant risks have emerged.”
The IMF director added that “the widespread adoption of crypto assets could undermine the effectiveness of monetary policy, prevent capital flow management measures, and increase fiscal risks.” In short, these policy guidelines create additional FUD that causes investors to rethink the cryptocurrency sector.
The weekly decline of 5.5% in total market capitalization since February 20 was driven by a 6.3% loss of Bitcoin (BTC) and a 4.6% drop in price of Ether (ETH). Consequently, the correction in altcoins was even more robust, with 9 of the top 80 cryptocurrencies down 15% or more in 7 days.
Stack (STX) gained 53% after the project announced a v2.1 update to strengthen the connection to Bitcoin-native assets and improve the control of smart contracts.
Optimism (OP) rallied 13% as the protocol released details of its upcoming superchain network, which focuses on interoperability between blockchains.
Curve (CRV) traded down 21% after Ethereum security analytics company proposed the implementation of a verkle tree, which could affect the use of Curve Finance on the mainnet, according to to the team.
Demand for leverage is balanced despite the price correction
A perpetual contract, also known as an inverse swap, has a fixed rate that is usually filled every eight hours. Exchanges use this fee to prevent exchange risk imbalances.
A positive funding level indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to become negative.
The 7-day funding level is slightly positive for Bitcoin and Ethereum, thus a balanced demand between longs (buyers) and shorts (sellers) leverage. The only exception is that there is a slightly higher demand for bets on the price of BNB, although it is not significant.
The put/call option ratio remains optimistic
Traders can gauge the overall sentiment of the market by measuring whether there is more activity through call (buy) options or put (sell) options. Generally, call options are used for bullish strategies, while put options are for bearish ones.
A 0.70 put-to-call ratio indicates that put options open interest lags other bullish calls and are therefore positive. In contrast, the 1.40 indicator favors options, which can be considered bearish.
related: ‘Liquidity’ has had the most impact on Bitcoin’s price in the past year, according to trader Brian Krogsgard
Apart from a brief moment on February 25 when the price of Bitcoin traded down to $22,750, demand for bullish call options has exceeded neutral-to-bearish puts since February 14.
The current put-to-call volume ratio of 0.65 indicates that the Bitcoin options market is more populated by neutral-to-bullish strategies, opting for call (buy) options by 58%.
From a derivatives market perspective, bulls are not afraid of a 5.5% drop in total market capitalization. There is nothing federal judges or the IMF can do to undermine investors’ confidence that they can benefit from the decentralized protocols and censorship resistance capabilities of cryptocurrencies. Finally, the derivatives market has shown resilience, paving the way for another upward trend.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making decisions.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.