Despite the recent stream of negative crypto and macroeconomic news, the total capitalization of the cryptocurrency market broke above $1 trillion on January 21. An encouraging sign is that derivative metrics do not show an increase in demand from bearish traders today.
The price of Bitcoin (BTC) gained 8% on the week, stabilizing near the $23,100 level at 18:00 UTC on January 27 as the market weighed the potential impact of Genesis Capital’s bankruptcy on January 19.
One of the problems is that Genesis Capital’s biggest debtor is Digital Currency Group (DCG), which is its parent company. Consequently, Grayscale fund management can be risky, so investors are not sure if Grayscale Bitcoin Trust (GBTC) assets can face liquidation. The investment vehicle currently has over $14 billion in Bitcoin positions for its holders.
The United States appeals court is set to hear arguments related to Grayscale Investment’s lawsuit against the Securities and Exchange Commission (SEC) on March 8. Fund managers are questioning the SEC’s decision to reject the launch of an asset-backed exchange-traded fund (ETF). .
Regulatory concerns also had a negative impact on the market after South Korean prosecutors sought an arrest warrant for Bithumb exchange owner Kang Jong-Hyun. On January 25, the Financial Investigation Division 2 of the South Seoul District Prosecutor’s Office indicted Kang and two Bithumb executives on charges of engaging in fraudulent illegal transactions.
A weekly increase of 7% in total market capitalization was held by Ether (ETH) 0.3% negative price movement. Still, bullish sentiment strongly weighed on altcoins, with 11 of the top 80 coins gaining 18% or more in the period.
Aptos (APT) gained 91% after its smart contract network total value locked (TVL) reached a record high of $58 million, powered by PancakeSwap DEX.
Fantom (FTM) rallied 50% after the announcement of a new database system, Carmen, and The new Phantom Virtual MachineTosca.
Optimism (OP) faced a 21% gain after increasing transaction volume during the NFT incentive program called Optimism Quest.
Demand for leverage is a bit supportive of the bulls
A perpetual contract, also known as a reverse 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 positive for Bitcoin and Ethereum, which means that the data shows a slightly higher demand for leveraged longs (buyers) versus shorts (sellers). Still, the weekly funding fee of 0.25% is not enough to discourage leveraged buyers.
Interestingly, Aptos is the only exception as the altcoin displays a negative 0.6% weekly funding fee – meaning short sellers pay to keep their positions open. This movement can be explained by the 91% rally in 7 days and shows that the sellers are anticipating some technical correction.
The put/call option ratio shows no signs of fear
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.
The put-to-call ratio of 0.70 shows that the put option opens up more bullish lag interest by 30% and is therefore bullish. In contrast, the 1.40 indicator favors the option with 40%, which can be considered bearish.
Although Bitcoin price failed to break the $23,300 resistance, demand for bullish call options has exceeded neutral-to-bear since January 6.
Currently, the put-to-call volume ratio is close to 0.50 as the options market is more populated with a neutral-to-bullish strategy, favoring call (buy) options by 50%.
related: Bitcoin to hit $200K before $70K ‘bear market’ next cycle – Forecast
Derivatives markets point to potential upside again
After the third consecutive week of gains, which totaled 40% year-on-year when excluding stablecoins, there were no signs of demand from short sellers. More importantly, the leverage indicator shows bulls are not using excessive leverage.
The derivatives market shows the potential to rise again and although the market revisits the market capitalization of $950 billion since January 18, there is no reason to panic. Currently, the Bitcoin options market is showing whales and market makers opting for a neutral-to-bullish strategy.
In the end, it is more likely to bet that the total market cap is $1 trillion, leaving room for profit.
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.