Altcoin Values Quickly Regained, But Derivatives Studies Show That Things Are Getting Tougher

May

21

By Awi Khan // in Altcoin

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Tether need is falling, and altcoin futures premiums are negative, showing a rising lack of interest amongst crypto investors.

The entire crypto market valuation dropped to the lowest in ten months on May 12, and the statistic is still testing the $1.23 trillion support level. The following seven days, however, were relatively tranquil, with Bitcoin (BTC) gaining 3.4 percent and Ether (ETH) increasing only 1.5 percent. The overall value of all crypto assets is $1.31 trillion.

The impacts of Terra’s (LUNA) downfall are still being seen across crypto markets, specifically in the decentralized financial sector. Additionally, the current fall in traditional markets has caused a market value loss of $7.6 trillion, which is greater than the dot-com bubble and the March 2020 sell-offs.

On May 17, US Federal Reserve Chairman Jerome Powell confirmed the Fed’s resolve to fight inflation by increasing interest rates, but he also informed that tightening could affect the unemployment figure.

Downward mood spread to cryptocurrency markets, with the “Fear and Greed Index,” a data-driven sentiment index, reaching 8/100 on May 17. This is the lowest number for the index since March 28, 2020, two weeks after the generalized meltdown that drove oil futures into a negative zone and dropped Bitcoin (BTC) below $4,000.

The winners and losers from the previous seven days are listed below. While the two most widely known cryptocurrencies experienced small climbs, a number of mid-capitalization altcoins had gains of 15% or more.

Monero (XMR) rose 22% as investors awaited the deployment of the “tail emission” at block 2,641,623, or around June 4. Miners are not totally dependent on transaction fees because the community chose to introduce a 0.6 XMR minimum reward in every block.

Cosmos (ATOM) recovered 16.5 percent, which looks to be part of a bigger pullback that began on May 12 when ATOM hit an eleven-month low near $8. It’s worth noting that, its parent chain, Cosmos Hub, experienced huge cash outflows from its liquidity pools.

The Tether Premium Seems A Bit Uncomfortable

The OKX Tether (USDT) premium is a strong metric of crypto demand within Chinese retail traders. It computes the distance between peer-to-peer (P2P) trades in China and the US currency.

Excessive buying demand pushes the sign above fair value at 100 percent, and Tether’s market offer is saturated during weak markets, producing a 4 percent or greater discount.

The Tether premium touched 5.4 percent on May 12, its biggest level in over six months, although the fluctuation could be connected to the Terra ecosystem’s large outflows, which were primarily the USD Terra (UST) stablecoin.

More lately, the signal has deteriorated slightly, and it now has a 1.8 percent discount. As the whole bitcoin market capitalization has fallen 34% in the last month, the lack of retail demand isn’t particularly worrying.

Altcoin Futures Reflect Disinterest In Leverage

Inverse swaps, often known as perpetual contracts, have an underlying rate that is paid every eight hours. This charge is utilized by exchanges to avoid exchange risk instabilities.

Longs (buyers) want extra leverage when the financing rate is positive. When shorts (sellers) demand more leverage, the funding rate drops under zero.

Perpetual contracts indicate a clashing mood, with Bitcoin and Ethereum having a somewhat positive (bullish) financing rate while altcoins exhibit the opposite. For example, Solana’s (SOL) negative 0.35 percent weekly rate is 1.5 percent each month, which most derivatives traders don’t mind.

Given the absence of improvements in derivatives signals, investors are losing confidence as the overall crypto market capitalization fights to maintain the $1.23 trillion support. The possibilities of a negative price movement remain dominant unless this sentiment changes.

 

About the author, Awi Khan

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