Is the total crypto market capitalization falling below $1 trillion as investment sentiment is low?

The high volatility of the cryptocurrency market is probably the most worrying thing for investors of all time From the current point of view, this kind of worry is not unreasonable, and the cryptocurrency market has recently experienced an unprecedented “bloody storm”. In just two months to date, the overall cryptocurrency market cap has fallen by 43%.


Although the total market value of cryptocurrencies has stabilized in the past 23 days, basically fluctuating in a small range from $1.19 trillion to $1.36 trillion; at the same time, BTC and ETH have also increased slightly, but this has not boosted morale. As a result, investor sentiment remains very low, especially from regulatory concerns, with many senior government officials and regulators calling for stricter laws to “protect investors.” One of the most typical examples is that Japan quickly issued a new decree on stablecoins after the collapse of Terra USD (UST), stipulating that stablecoins must be pegged to Japanese yen or other fiat currencies, and that holders have the right to redeem at face value. They; while also stipulating that stablecoins can only be issued by licensed banks, registered remittance agents and trust companies. 


A slight rise in the market did not save the overall depressed mood of the market

German software provider Alternative has developed an indicator to measure investor sentiment, the Fear & Greed Index, which is expressed in the form of intuitive numbers, ranging from 0-100. The closer the value is to 0, the better the market. The more fearful investor sentiment is; the closer the value is to 100, the more greedy the investor sentiment in the market is. The sentiment indicator hit “10” on June 3, clearly reflecting the current bearish sentiment towards cryptocurrencies. Since January 27, the total cryptocurrency market capitalization has lost a total of 1.7 trillion US dollars, an all-time low, so the sentiment indicator has not crossed 20 since May 8.


Although BTC and ETH, the two major cryptocurrencies in the market today, have seen modest gains, a small number of non-mainstream cryptocurrencies with mid-cap market caps have come to life, with some rising by more than 10% or more.


1. The most notable of these is Waves, which rose 109%. This has to come down to the return of liquidity of the Waves on-chain lending protocol Vires Finance and the re-pegging of the algorithmic stablecoin protocol Neutrino USD (USDN) to the U.S. dollar.

2. Affected by the Vasil hard fork plan on June 29, the ADA token on the Cardano blockchain also rose by 19%. The Vasil hard fork is expected to bring significant improvements in scalability and functionality to Cardano and its smart contract platform Plutus, spurring a continued rise in the number of Cardano’s active staking pools.

3. Recently, the remittance giant MoneyGram (MoneyGram) cooperated with Stellar Development Foundation (SDF) to use its blockchain to provide users with stable currency remittance services, while also converting it into legal currency. Stellar (XLM) jumped 18.6% on the positive news.

However, Solana (SOL), the top 10 by market cap, fell 8% after another unexpected halt in block production on June 1. And this is the eighth time the Solana network has been disrupted in the past 12 months, with serious negative consequences. It is reported that 4 hours after the outage, validator operators were asked to prepare for another restart.

Data doesn’t lie, price pressures multiply

Tether (USDT) Premium is another good indicator of demand for cryptocurrency by local retail traders, which measures the difference between Tether (USDT) transactions and USD in the P2P market. Excessive buying demand tends to force this metric beyond fair value. During a bear market, Tether’s market quotation usually has a discount rate of 4% or even higher. Since May 30, Tether has traded at an average discount of just over 2% in Asian P2P markets. On June 1, the indicator rebounded slightly after bottoming out at a 4% discount. As can be seen from this set of data, as the total market capitalization of cryptocurrencies failed to break through the $1.3 trillion resistance level, there was a lack of retail demand for cryptocurrencies.

Perpetual contracts, also known as inverse swaps, have a fixed interest rate, usually charged every 8 hours. The exchange charges this fee to ensure that there is no exchange rate risk imbalance. Even if the public interest of buyers and sellers is consistent at all times, leverage may vary. When longs (buyers) need more leverage, funding rates turn positive; when shorts (sellers) need additional leverage, the opposite happens and funding rates turn negative. From the current point of view, the funding rates of BTC and ETH are slightly positive, while non-mainstream cryptocurrencies are just the opposite. It’s worth noting that Solana’s weekly rate is minus 0.20%, which translates to minus 0.8% per month, but that’s not a big deal for most derivatives traders.

The BTC options market continues to price in near-term uncertainty and downside risks, especially as implied volatility experiences a substantial increase over the next three to six months, according to analysis by blockchain analytics firm Glassnode. Implied volatility for short-term in-the-money options more than doubled from 50% to 110%, while implied volatility for 6-month options jumped to 75%. Looking ahead to the end of the second quarter, the market is heavily biased towards BTC puts with key strikes at $25k, $20k and $15k. There are significantly fewer call options open, with open interest concentrated around the strike price of $40,000. This suggests that the market is strongly inclined to hedge risk, at least until the middle of the year.

However, given the current slightly higher demand for short positions in non-mainstream cryptocurrencies and the apparent lack of buying interest in Asian retail markets, the crypto market is expected to face greater downside risks. If the cryptocurrency market wants to get out of the bear market, the support level of the $1.19 trillion market capitalization is very critical, so as to prevent sellers from increasing leverage, making short bets, and making financing rates negative.

While the current market profitability is significantly better than the bear market of 2018 or 2020, it is still in a worse state than the May-July 2021 period. The recent correction has pushed historically large numbers of long-term holders of Bitcoin into unrealized losses, meaning Bitcoin bought between August and November 2021 is now held at a loss by investors Yes, and the largest number ever. At this stage, the vast majority of investors holding bitcoins costing more than $40,000 are long-term holders, and investors will continue to see bitcoin values ​​hovering around $30,000. The accumulation trend remains very high in this area. Constructive, albeit a lack of motivation to break higher (or lower).

It is undeniable that every investment and every transaction involves risks. Therefore, investors must keep their eyes open and do their own analysis and research before making any investment decisions to ensure the safety of funds.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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