The cryptocurrency market has been under pressure from a bearish trend for the past eight weeks, causing the total market capitalization to drop to its lowest level in over two months, reaching $1.06 trillion, a 2.4% decline between June 4 and June 11.
Unlike previous instances, Bitcoin did not contribute to this decline, as the top cryptocurrency is up 1% over a 7-day period. Instead, a few altcoins, such as BNB, ADA, SOL, MATIC, and DOT, have dropped more than 15%, putting pressure on the market.
The downtrend that began in mid-April has tested the support level on multiple occasions, indicating that a break to the upside would require significant effort from the bulls.
Last week, the United States Securities and Exchange Commission filed separate lawsuits against crypto exchanges Binance and Coinbase, tagging several altcoins as securities.
Despite the negative regulatory environment, two derivatives metrics suggest that bulls are not giving up yet, even though breaking the bearish price formation to the upside will likely be a challenge.
In the United States, crypto exchanges are facing severe constraints. On June 9, Binance.US announced that it would suspend U.S. dollar deposits and withdrawal channels, as well as delist USD trading pairs. The exchange plans to transition to a crypto-only exchange but will maintain a 1:1 ratio for customer assets. The SEC issued an emergency order on June 6 to freeze the assets of Binance.US.
On the same day, Crypto.com announced that it would no longer service institutional clients in the United States. Although the Singapore-based company claimed that there was a lack of client demand, the timing of this decision, which coincides with the recent actions against Coinbase and Binance, has raised suspicions, as noted by CryptoTea, the founder of UtilizeWeb3.
Although Ether, the vice-leader, was not targeted by the SEC, it still experienced a 3.5% decline in trading between June 4 and June 11, following co-founder Vitalik Buterin’s comment that the Ethereum network could “fail” without proper scaling. In a blog post on June 9, Buterin emphasized that the success of Ethereum hinges on layer-2 scaling, as well as wallet security and privacy-preserving features.
Balanced Leverage Demand Evident in Derivatives Markets
Perpetual contracts, also referred to as inverse swaps, typically carry an embedded rate that is charged every eight hours.
A positive funding rate signals that buyers, or longs, are seeking greater leverage, while a negative funding rate arises when sellers, or shorts, require added leverage.
The seven-day funding rate for BTC and ETH was neutral, indicating a balanced demand from leveraged longs and shorts using perpetual futures contracts. Interestingly, BNB, SOL, and ADA did not exhibit any significant short demand following a weekly price drop of 15% or more.
Modest Resilience in Tether Demand Across Asia
The Tether premium serves as a reliable measure of China-based crypto retail trader demand, calculated as the difference between China-based peer-to-peer trades and the United States dollar.
Excessive buying demand tends to push the indicator above fair value, at 100%, while bearish markets flood Tether’s market offer, causing a discount of 2% or more.
Presently, the Tether premium on OKX sits at 99.8%, indicating balanced demand from retail investors. As a result, the indicator remains resilient, despite the cryptocurrency market capitalization dropping 17.7% over the last eight weeks, from $1.29 trillion to $1.06 trillion.
Considering the balanced demand observed in the funding rate and stablecoin markets, bulls should be content, as the recent regulatory FUD failed to push the cryptocurrency market capitalization below $1 trillion.
It remains uncertain whether the market will break free from the current bearish trend. Additionally, there is no apparent reason for bulls to jump in and bet on a V-shaped recovery, given the regulatory uncertainties. Ultimately, bears remain comfortable, despite the resilience shown in derivatives and stablecoin metrics.