Crypto

Total Crypto Market Cap Falls to $850 Billion as Data Suggests Further Drop

The total cryptocurrency market cap fell 24% between Nov. 8 and Nov. 10, hitting a low of $770 billion. However, after the initial panic was brought under control and forced futures liquidations no longer put pressure on asset prices, a strong 16% rally followed.

Total Crypto Market Cap in USD, 2 days. Source: Trading View

This week’s decline was not the market’s first rodeo below the $850 billion market cap level, and a similar trend appeared in June and July. Either way, support showed strength, but the intraday low of $770 billion on November 9 was the lowest since December 2020.

The 17.6% weekly decline in total market capitalization was mainly affected by Bitcoin (BTC) 18.3% loss and Ether (ETH) Negative price movement of 22.6%. Still, the price impact was more severe on altcoins, with 8 of the top 80 coins losing 30% or more over the period.

Weekly winners and losers among the top 80 coins. Source: Nomics

FTX Token (FTT) and Solana (FLOOR) have been hit hard by the liquidations following the insolvency of the FTX exchange and Alameda Research.

Aptos (APT) fell 33% despite deny the rumors that the treasuries of Aptos Labs or Aptos Foundation were held by FTX.

Stablecoin demand remained neutral in Asia

The USD coin (USDC) premium is a good indicator of demand from China-based retail crypto traders. It measures the difference between peer-to-peer transactions based in China and the US dollar.

Excessive buying demand tends to pressure the indicator above the 100% fair value and during bear markets the stablecoin market supply is flooded leading to a discount of 4% or more.

USDC peer-to-peer against USD/CNY. Source: OKX

Currently, the USDC premium stands at 100.8%, flat from the previous week. Therefore, despite the 24% drop in total cryptocurrency market capitalization, no panic selling came from Asian retail investors.

However, this data should not be viewed as bullish as USDC buying pressure indicates traders are seeking refuge in stablecoins.

Few leveraged buyers use futures markets

Perpetual contracts, also known as reverse swaps, have an embedded rate typically charged every eight hours. Exchanges use these fees to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when the shorts (shorts) require additional leverage, causing the funding rate to become negative.

7-day funding rate of perpetual futures on November 11. Source: Coinglass

As shown above, the 7-day funding rate is slightly negative for the two largest cryptocurrencies and the data indicates excessive demand for shorts (sellers). Even though there is a weekly cost of 0.40% to keep positions open, this is nothing to worry about.

Traders should also analyze options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.

Related: Solana TVL drops nearly a third as FTX turmoil rocks the ecosystem: finance redefined

The put/call options ratio points to deteriorating sentiment

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

A put-call ratio of 0.70 indicates that the open interest of put options lags the most bullish calls by 30% and is therefore bullish. On the other hand, an indicator at 1.20 favors put options by 20%, which can be considered bearish.

Put-call ratio of BTC options. Source: Cryptorank.io

As the price of Bitcoin fell below $18,500 on Nov. 8, investors rushed to seek downside protection. As a result, the put-call ratio then fell to 0.65. Still, the Bitcoin options market remains more heavily populated with neutral to bearish strategies, as indicated by the current level of 0.63.

Combining the lack of demand for stablecoins in Asia and the negatively skewed perpetual contract premiums, it becomes clear that traders are not confident that the $850 billion market cap support will hold in the near term.