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Market selling might ease, but traders are on the sidelines until BTC confirms $20K as support

The total crypto market capitalization fell off a cliff between June 10 and 13 as it broke below $1 trillion for the first time since January 2021. Bitcoin (BTC) fell by 28% within a week and Ether (ETH) faced an agonizing 34.5% correction.Total crypto market cap, USD billion. Source: TradingViewPresently, the total crypto capitalization is at $890 million, a 24.5% negative performance since June 10. That certainly raises the question of how the two leading crypto assets managed to underperform the remaining coins. The answer lies in the $154 billion worth of stablecoins distorting the broader market performance.Even though the chart shows support at the $878 billion level, it will take some time until traders take in every recent event that has impacted the market. For example, the U.S. Federal Reserve raised interest rates by 75 basis points on June 15, the largest hike in 28 years. The central bank also initiated a balance sheet cut in June, aiming to reduce its $8.9 trillion positions, including mortgage-backed securities (MBS).Venture firm Three Arrows Capital (3AC) has reportedly failed to meet margin calls from its lenders, raising high major insolvency red flags across the industry. The firm’s heavy exposure to Grayscale Bitcoin Trust (GBTC) and Lido’s Staked ETH (stETH) was partially responsible for the mass liquidation events. A similar issue forced crypto lending and staking firm Celsius to halt users’ withdrawals on June 13.Investors’ spirit is effectively brokenThe bearish sentiment was clearly reflected in crypto markets as the Fear and Greed Index, a data-driven sentiment gauge, hit 7/100 on June 16. The reading was the lowest since August 2019 and it was last seen outside the “extreme fear” zone on May 7.Crypto Fear and Greed Index. Source: alternative.meBelow are the winners and losers since June 10. Curiously, Ether was the only top-10 crypto to figure on the list, which is unusual during strong corrections.Weekly winners and losers among the top 80 coins. Source: NomicsWAVES lost another 37% after the project’s largest decentralized finance (DeFi) application Vires Finance implemented a daily $1,000 stablecoin withdrawal limit.Ether dropped 34.5% as developers postponed the switch to a proof-of-stake consensus mechanism for another two months. The “difficulty bomb” will essentially cease mining processing, paving the way for the Merge.Aave (AAVE) traded down 33.7% after MakerDAO voted to cut off the lending platform Aave’s ability to generate Dai (DAI) for its lending pool without collateral. The community-led decision aims to mitigate the protocol’s exposure to a potential impact from staked Ether (stETH) collateral.Asian traders flew into stablecoinsThe OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, Tether’s market offer is flooded and causes a 4% or higher discount.Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKXContrary to expectations, Tether had been trading with a premium in Asian peer-to-peer markets since June 12. Despite the massive sell-off in crypto prices, investors have been seeking protection in stablecoins instead of exiting to fiat currency. This movement lasted until June 17, as the USDT paired its price versus the official foreign exchange currency rate.One should analyze crypto derivatives metrics to exclude externalities specific to the stablecoin market. For instance, perpetual contracts have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.Accumulated perpetual futures funding rate on June 17. Source: CoinglassThose derivative contracts show more significant demand for leverage short (bear) positions across the board. Although Bitcoin and Ether’s numbers were insignificant, the TRX token and Polkadot (DOT) situation raise concerns.Pokadot’s negative 0.90% weekly rate equals 3.7% per month, meaning those betting on the price decrease are willing to pay a reasonable fee to maintain their leverage positions. This is usually interpreted as a sign of confidence from bears; hence, slightly worrisome.The market dipped by 70% and there’s still no demand from leverage longsThe big question is how backward-looking is the investors’ fear and lack of appetite for buyers using leverage despite the 70% correction since the November 2021 peak. It is encouraging to know that Asian traders moved their positions to Tether instead of exiting all markets to fiat deposits.There likely won’t be a clear sign of a bottom formation, but Bitcoin bulls need to hold ground at $20,000 to avoid breaking a 13-year-old pattern of never breaking below the previous four-year cycle all-time high.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin price broke to the upside, but where are all the leveraged long traders?

This week’s Bitcoin (BTC) chart leaves little doubt that the symmetrical triangle pattern is breaking to the upside after constricting the price for nearly 20 days. However, derivatives metrics tell a completely different story because professional traders are unwilling to add leveraged positions and are overcharging for downside protection.BTC-USD 12-hour price at Kraken. Source: TradingViewWill BTC reverse course even as macroeconomic conditions crumble?Whether BTC turns the $30,000 to $31,000 level into support depends to some degree on how global markets perform.The last time U.S. stock markets faced a seven-week consecutive downtrend was over a decade ago. New home sales in the U.S. declined for the fourth straight month, which is also the longest streak since October 2010.China saw a whopping 20% year-on-year decline for its on-demand services, the worst change on record. According to government data released on May 30, consumer spending for internet services from January to April stood at $17.7 billion.The value of stock offerings in Europe also hit the worst level in 19 years after rising interest rates, inflation and macroeconomic uncertainties caused investors to seek shelter in cash positions. According to Bloomberg, initial public offerings and follow-on transactions raised a mere $30 billion throughout 2022.All of the above make it easier to understand the discrepancy between the recent Bitcoin price recovery to $32,300 and weak derivatives data because investors are pricing higher odds of a downturn, primarily driven by worsening global macroeconomic conditions.Derivatives metrics are neutral-to-bearishRetail traders usually avoid quarterly futures due to their price difference from spot markets, but they are professional traders’ preferred instrument because they avoid the perpetual contracts fluctuating funding rate.These fixed-month contracts usually trade at a slight premium to spot markets because investors demand more money to withhold the settlement. This situation is not exclusive to crypto markets. Consequently, futures should trade at a 5% to 12% annualized premium in healthy markets.Bitcoin 3-month futures’ annualized premium. Source: LaevitasAccording to data from Laevitas, Bitcoin’s futures premium has been below 4% since April 12. This reading is typical of bearish markets and it’s worrisome that the metric failed to break above the 5% neutral threshold even as the price moved toward $32,000.To exclude externalities specific to the futures instrument, traders must also analyze the Bitcoin options markets. The 25% delta skew is optimal as it shows when Bitcoin market makers and arbitrage desks are overcharging for upside or downside protection.During bearish markets, options investors give higher odds for a price crash, causing the skew indicator to move above 12%. On the other hand, a bull markets’ generalized excitement induces a negative 12% or lower skew.Bitcoin 30-day options 25% delta skew: Source: LaevitasThe 30-day delta skew peaked at 25.4% on May 14, the highest-ever record and typical of extremely bearish markets. However, the situation improved on May 30 and 31 as the indicator stabilized at 14%, but it prices in higher odds of a price crash. Still, it shows a moderate sentiment improvement from derivatives traders.The risks of a global economic slowdown are probably the main reason why Bitcoin options markets are stressed and why the futures premium is still low. The 30-day correlation of BTC versus the S&P 500 index is at 89%, meaning traders have fewer incentives to place bullish bets on cryptocurrencies.Some metrics suggest that the stock market may have bottomed last week, especially since it’s trading 8.5% above the May 20 intraday low, but weak economic numbers are weighing on investor sentiment. This drives the risk-averse momentum and has a negative impact on cryptocurrency markets.Until there’s a better definition for traditional finance and the world’s biggest economies, Bitcoin traders should continue to avoid building leveraged long positions and maintain a bearish stance, a feature that is currently reflected in options markets.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin’s recent gains have traders calling a bottom, but various metrics remain bearish

On May 30, the total crypto market capitalization gained 4% and currently is within reach of a $1.3 trillion market capitalization. The move was enough to erase the losses from the previous seven days and was driven mainly by Bitcoin’s (BTC) 4.9% gain during that time frame.Total crypto market cap, USD billion. Source: TradingViewApart from Bitcoin, Cardano (ADA) was the only large-cap cryptocurrency that managed to close the week with a positive 4.5% performance. Meanwhile, Ether (ETH), BNB, Ripple (XRP) and Solana (SOL) failed to present weekly gains.Bitcoin’s turn-around happened after the United States stock market presented gains for the first time after seven consecutive negative weeks. The longest losing streak in over a decade for the S&P 500 was followed by a 6.6% positive performance at the closing bell on May 22.According to Yahoo! Finance, “a favorable batch of quarterly results from major retailers helped at least temporarily mitigate concerns over the toll [that …] inflationary headwinds could take on profit margins.” For instance, Macy’s (M) gained 29.1% in the week, followed by Nordstrom (JWN) 25.4% positive performance and Ross Stores (ROST) rallied by 21.5%.Curiously, JP Morgan sent out a research note to clients on May 25, claiming that $38,000 was the fair value for Bitcoin. The global investment bank also said that Terra’s (LUNA) collapse did not harm the crypto venture capital demand.On May 23, during the World Economic Forum (WEF) in Davos, Switzerland, PayPal vice president Richard Nash stated the company’s intention to embrace all possible crypto and blockchain services. After rolling out its Bitcoin trading across the United States in 2020, PayPal continues to expand its digital currency-related offering.Below are the winners and losers from the past seven days. While the leading cryptocurrencies presented modest movements, some mid-capitalization altcoins presented high volatility.Weekly winners and losers among the top 80 coins. Source: NomicsSynthetix (SNX) rallied 15.8% after Kwenta, a zero-slippage derivatives trading application powered by Synthetix, reached $325 million in volume.Helium (HNT) gained 15.2% after details regarding improvement proposal #51 were released on May 27. The change introduces a framework to enable subnets with their own token and governance.STEPN Governance (GMT) lost 14.6% after blocking users based in mainland China from its mobile app.Terra Luna Classic (LUNC), previously known as LUNA, moved down 12.2% after the South Korean authorities summoned all employees at Terraform Labs as part of a full-scale investigation.Due to the mixed performance of altcoin markets, it is worth investigating how traders are positioned according to trading and derivatives indicators.The Tether premium shows a lack of retail demandThe OKX Tether (USDT) premium is a good gauge of China-based retail trader crypto demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.Excessive buying demand tends to pressure the indicator above fair value. On the other hand, during bearish markets, Tether’s market offer is flooded, causing a 4% or higher discount.Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKXBetween May 23 and 30, the Tether premium in CNY terms has averaged a 2% discount, signaling a lack of retail demand. More importantly, the 4% crypto market capitalization rally on May 30 did not change investors’ sentiment.Related: Crypto’s youngest investors hold firm against headwinds — and headlinesDerivatives indicators are slightly bearish for altcoinsPerpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.Accumulated perpetual futures funding rate on May 30. Source: CoinglassPerpetual contracts reflect mixed sentiment as Bitcoin and Ether held a slightly positive (bullish) funding rate, but altcoins signaled the opposite. For example, Solana’s negative 0.20% weekly rate equals 0.8% per month, which is irrelevant for most derivatives traders.The data suggests that investors are not rushing in to confirm that the recent price recovery represents a trend change. While the total crypto market capitalization broke above the $1.3 trillion support, traders are pricing higher odds of a downturn. So far, there is no clear indication of a market bottom according to trading metrics.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Weak stocks and declining DeFi use continue to weigh on Ethereum price

Ether’s (ETH) 12-hour closing price has been respecting a tight $1,910 to $2,150 range for twelve days, but oddly enough, these 13% oscillations have been enough to liquidate an aggregate of $495 million in futures contracts since May 13 according to data from Coinglass.Ether/USD 12-hour price at Kraken. Source: TradingViewThe worsening market conditions were also reflected in digital asset investment products. According to the latest edition of CoinShare’s weekly Digital Asset Fund Flows report, crypto funds and investment products saw a $141 million outflow during the week ending on May 20. In this instance, Bitcoin (BTC) was the investors’ focus after experiencing a $154 weekly net redemption.Russian regulation and crumbling U.S. tech stocks escalate the situationRegulatory uncertainty weighed on investor sentiment after an updated version of the Russian mining law proposal came to light on May 20. The document in the lower chamber of the Russian parliament no longer contained the obligation for crypto mining operators registry nor the one-year tax amnesty. As cited by local media, the legal State department stated that these measures could “possibly incur costs on the federal budget.”Additional pressure on Ether price came from the Nasdaq Composite Index’s 2.5% downturn on May 24. In addition, the heavily-tech stock-driven indicator was pressured after social media platform Snap (SNAP) tumbled 40%, citing rising inflation, supply chain constraints and labor disruptions. Consequently, Meta Platforms (FB) shares fell by 10%.On-chain data and derivatives are in favor of bearsThe number of active addresses on the largest Ethereum network’s decentralized applications (DApps) has dropped by 27% from the previous week.Ethereum network’s most active DApps in USD terms. Source: DappRadarThe network’s most active decentralized applications saw a substantial reduction in users. For instance, Uniswap V3 weekly addresses decreased by 24%, while Curve faced 52% fewer users.To understand how professional traders, whales and market makers are positioned let’s look at Ether’s futures market data.Quarterly futures are used by whales and arbitrage desks primarily due to their lack of a fluctuating funding rate. These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer.These futures should trade at a 5% to 12% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.Ether futures 3-month annualized premium. Source: LaevitasRelated: Bitcoin price returns to weekly lows under $29K as Nasdaq leads fresh U.S. stocks diveEther’s futures contracts premium went below the 5% neutral-market threshold on April 6. There’s an evident lack of conviction from leverage buyers because the current 3% basis indicator remains depressed.Ether might have gained 2% after testing the $1,910 channel resistance on May 24, but on-chain data shows a lack of user growth, while derivatives data point toward bearish sentiment.Until there’s some morale improvement that boosts the use of decentralized applications and the Ether futures premium regains the 5% neutral level, the odds of the price breaking above the $2,150 resistance seems low.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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2 key Ethereum price metrics suggest traders will struggle to hold the $2K support level

Ether (ETH) price has been trying to establish an ascending channel since the May 12 market-wide crash that sent its price to $1,790. Currently, the altcoin’s support stands at $2,000, but the high correlation to traditional markets is causing traders to be highly skeptical s cryptocurrency market recovery. Ether/USD 4-hour price at Bitstamp. Source: TradingViewTo date, the Federal Reserve continues to dictate the markets’ performance and uncertainty has been the prevailing sentiment because the central banks of major economies are trying to tame inflation. Considering that the correlation between crypto markets and the S&P 500 index has been above 0.85 since March 29, traders are likely less inclined to bet on Ether decoupling from wider markets anytime soon.Currently, the correlation metric ranges from a -1, meaning select markets move in opposite directions to a +1, a perfect and symmetrical movement. Meanwhile, 0 would show disparity or a lack of relationship between the two assets.U.S. Federal Reserve Chairman Jerome Powell emphasized on May 17 his resolve to get inflation down by raising interest rates until prices start falling back toward a “healthy level.” Still, Powell cautioned that the Fed’s tightening movement could impact the unemployment rate. So from one side, the traditional markets were pleased to be reassured that the monetary authority plans a “soft landing,” but that doesn’t reduce the unintended consequences of achieving “price stability.”Regulatory uncertainty also had a negative impactFurther pressuring Ether’s price was a document published on May 16 by the U.S. Congressional Research Service (CRS) that analyzes the recent TerraUSD (UST) debacle. The legislative agency that supports the United States Congress noted that the stablecoin industry is not “adequately regulated.”In the same time, the Ethereum network’s total value locked (TVL) has dropped by 12% from the previous week.Ethereum network total value locked, ETH. Source: Defi LlamaThe network’s TVL dropped from 28.7 billion Ether to the current 25.3 million. The doomsday scenario brought on by Terra’s (LUNA) collapse negatively impacted the decentralized finance industry, an event which was felt across the board on the smart contract blockchains. All things considered, investors should focus on the Ethereum network’s resilience during this unprecedented event.To understand how professional traders are positioned, including whales and market makers, let’s look at Ether’s futures market data.Ether futures shows signs of distressQuarterly futures are whales and arbitrage desks’ preferred instruments due to their lack of a fluctuating funding rate. These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers request more money to withhold settlement longer. Those futures should trade at a 5% to 12% annualized premium in healthy markets. This situation is technically defined as “contango” and is not exclusive to crypto markets.Ether futures 3-month annualized premium. Source: LaevitasAs displayed above, Ether’s futures contracts premium went below 5% on April 6, below the neutral-market threshold. Furthermore, the lack of leverage demand from buyers is evident because the current 3.5% basis indicator remains depressed despite Ether’s discounted price.Ether’s crash to $1,700 on May 12 drained any leftover bullish sentiment and more importantly, the Ethereum network’s TVL. Even though Ether price displays an ascending channel formation, bulls are nowhere near the confidence levels required to place leveraged bets.The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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