The total value of all cryptocurrencies decreased by 24% between November 8 and November 10, reaching a $770 billion low. However, after the initial panic had subsided and forced future contracts liquidations were no longer pressuring asset prices, a sharp 16% recovery followed.
This is not the first time the market has dipped below $850 billion in market capitalization, and a similar pattern has emerged in the past few months. Both the support shown and the $770 billion intraday bottom on November 9 were strong.
The steep 17.6% weekly decline in market capitalization was mostly due to Bitcoin’s loss of $16,845 and Ether’s steep 22.6% drop in price. Even as the price of bitcoin slumped, the impact was more severe on other cryptocurrencies, with eight of the top eighty coins losing 30% or more in the period.
FTX Token and Solana were hit hard by liquidations following the insolvency of FTX exchange and Alameda Research. Aptos (APT) stock dropped 33% despite the fact that Aptos Labs or Aptos Foundation treasuries were not mentioned in FTX’s recent report.
The demand for stablecoins remained relatively stable in Asia.
The USD Coin premium is a good measure of China-based crypto traders’ demand for cryptocurrencies. It measures the difference between China-based peer-to-peer trades and the United States dollar. When there is a lot of buying demand for a stablecoin, this often causes the indicator above fair value to move up to 100%, and in a bear market this can cause the market offer for the stablecoin to be flooded, which causes a 4% or higher discount.
The USDC premium stands at 100.8%. It remains unchanged from the previous week. This demonstrates that despite the 24% drop in the total cryptocurrency market capitalization, Asian retail investors remain calm and do not sell their holdings.
However, despite this data indicating strong buying pressure for stablecoins, it should not be taken as bullish news – as traders may be seeking refuge in stablecoins during turbulent times.
Few buyers are using futures markets to gain an advantage.
Perpetual contracts with an embedded rate are usually charged every eight hours. Exchanges use this fee to prevent exchange imbalances.
A positive funding rate suggests that buyers want more leverage. However, when shorts (sellers) require more leverage, this causes the funding rate to turn negative.
The seven-day funding rate is slightly negative for the two largest cryptocurrencies, and this suggests an excessive demand for shorts (sellers). Even though there is a 0.40% weekly cost to maintain open positions, it is not a worry.
Traders should also look at the options markets to see if whales and arbitrage desks are placing high bets on bullish or bearish strategies.
The number of options put (called) suggests that sentiment is worsening.
Traders can determine the sentiment of the market by gauging whether more activity is occurring in call (buying) options or put (selling) options. Generally, call options are used for bullish strategies, while put options are for bearish ones.
A put-to-call ratio of 0.70 suggests that put options are interested in buying 30% more bullish calls than calls. This indicates that the market is bullish and that further investing in puts may be profitable. In contrast, a 1.20 indicator favors selling options by 20%, which is considered bearish.
As the price of Bitcoin broke below $18,500 on November 8, investors rushed to seek downside protection. This led to an increase in the put-to-call ratio to 0.65. Still, the Bitcoin options market remains more heavily populated by neutral-to-bearish strategies, as the current 0.63 level indicates.
There is little demand for stablecoins in Asia, and the premiums on perpetual contracts are negatively skewed. This means that traders are not confident that the $850 billion market capitalization will hold.
