Crypto market capitalization approaches $1 trillion as Bitcoin price approaches $20,000

Cryptocurrency market capitalization reached its highest level in over two months on January 13 after surpassing $900 billion on January 12.

While the 15.5% year-to-date increase seems promising, this level is still 50% of the $1.88 trillion crypto market cap seen before the Terra-Luna ecosystem collapsed in April 2022. is also below

“Hopeful skepticism” seems to best describe most investor sentiment at this point, especially after the recent struggle to recapture the $1 trillion market cap in early November. The rally to $1 trillion was followed by a 27.6% correction in three days, undoing the bullish momentum traders had been hoping for.

While Bitcoin (BTC) is up 15.7% year-to-date, a different scenario has emerged for altcoins, with a handful of coins rising more than 50% over the same period. Some investors attributed the rise to the US Consumer Price Index (CPI) data released on January 12, supporting the hypothesis that inflation continues to fall.

Macroeconomic conditions may have improved, but things look bleak for cryptocurrency companies. New York-based Metropolitan Commercial Bank (MCB) announced on Jan. 9 that it will be shutting down its cryptocurrency vertical, citing a changing regulatory environment and recent setbacks in the industry. Crypto-related clients accounted for his 6% of total bank deposits.

On January 12, the U.S. Securities and Exchange Commission (SEC) charged cryptocurrency lender Genesis Global Capital and cryptocurrency exchange Gemini for offering unregistered securities through Gemini’s “Earn” program. .

After Crypto.com announced a new wave of employee layoffs on January 13th, the final blow came on January 13th, cutting the global workforce by 20%. Other cryptocurrency exchanges that recently announced job cuts last month include Kraken, Coinbase and Huobi.

Despite the frightening news flow, only the UNUS SED (LEO) ended the first 13 days of 2023 in the red, with macroeconomic tailwinds favorable to risk assets.

Lido DAO (LDO) is up 108%. This is because investors expect Ethereum Shanghai to upgrade. This will enable the withdrawal of staked Ether, increasing the demand for liquid staking protocols.

Aptos (APT) is up 98% after several decentralized applications, including Liquidswap DEX, Ditto Finance’s staking and yields, and NFT marketplace Topaz Market, began increasing their trading volumes.

Optimism (OP) increased by 70% after the Layer 2 network kicked off, combining with competing Arbiturm to outperform Ethereum’s main chain transactions.

Leverage demand is balanced between bullish and bearish

Perpetual contracts, also known as inverse swaps, have built-in rates that are typically billed every 8 hours. Exchanges use this fee to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when the short (seller) requires additional leverage, resulting in a negative funding rate.

The 7-day funding rate for Bitcoin and altcoins is close to zero, with data showing balanced demand between longs (buyers) and shorts (sellers) of leverage.

If the bears are paying 0.3% a week to keep their leveraged bets on Solana (SOL) and BNB, that would be just 1.2% a month. This is irrelevant for most traders.

Related: Bitcoin price rises to $19,000, but analysts say a $17.3,000 retest could occur next

Trader Demand for Neutral to Bullish Options Soars

Traders can gauge overall market sentiment by measuring whether more activity is taking place via call (buy) or put (sell) options. Generally speaking, call options are used for bullish strategies and put options are used for bearish strategies.

A put-to-call ratio of 0.70 indicates that the put option open interest lags the more bullish calls by 30%, which is bullish. In contrast, if the indicator is 1.40, the put option is 40% better and can be considered bearish.

From Jan 4th to Jan 6th, protective put options dominated the space as the metric rose above 1. Since January, the move eventually weakened and the opposite situation emerged as demand for neutral to bullish call options became excessive. 7.

Lack of Leveraged Shorts and Demand for Protection Put Points to Bullish Trend

Given the 15.7% rise since early 2023, the derivatives indicator reflects no indication of demand from leveraged shorts or protective put options. Bulls can rejoice that the $900bn market cap resistance faces little resistance, but derivatives indicators show bears are patiently waiting for a short entry point. .

Given the market’s bearish news flow, the bulls’ main hope lies in framing a favorable macroeconomic environment that will largely depend on how retail sales data are reported next week.

China will also release its economic data on January 16th, and the US will do the same on January 18th. Another potential impact on prices could be his CPI print in the UK due to be unveiled on January 18th.