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A bleak short-term forecast for the cryptocurrency sector is reflected in weak retail demand and negative derivatives statistics.
The $1.65 trillion support level was retested on May sixth, and the whole cryptocurrency market capitalization has been trading within a declining channel for 24 days. Following the decline to $1.65 trillion, Bitcoin (BTC) fell to $35,550, the lowest price in the previous 70 days.
Total crypto market cap, USD billion. Source: TradingView
The total market value of all cryptocurrencies fell by 6% during the last seven days in terms of performance, but this little correction in the general market does not account for several mid-capitalization altcoins, which managed to lose 19% or more during the same period.
After TRON DAO launched a USDD, a decentralised stablecoin, on May 5, Tron (TRX) increased by 26.9%. Through the BTTC cross-chain protocol, the algorithmic stablecoin is linked to Ethereum and BNB Chain (BNB).
After completing 6 million swaps on the network, the decentralised exchange governance application 1inch (1INCH) earned 5.6% and overtook Polygon’s (MATIC) network leader.
Weekly winners and losers among the top 80 coins. Source: Nomics
The popular move-to-earn lifestyle app’s native token, STEPN (GMT), fell 35.7% after a 70% rise between April 18 and April 28. The movement of Apecoin (APE), which grew 94% between April 22 and April 28, was comparable.
On May 6th, the Tether premium became low
The difference between China-based peer-to-peer transactions and the US dollar is measured by the OKX Tether (USDT) premium, which indicates retail demand in China.
A high level of purchasing demand causes the indicator to be 100% over fair value. On the other side, Tether’s market offer is oversaturated in bearish markets, resulting in a discount of 4% or more.
Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX
On April 30, the OKX Tether premium reached a high of 1.7%, indicating some excessive retail demand. Over the next five days, the statistic, however, returned to a 0% premium.
More recently, the OKX Tether premium became negative by 1% in the early hours of May 6. According to data, consumer mood declined when Bitcoin declined below $37,000.
Futures markets display a range of emotions
Inverse swaps and perpetual contracts both feature an imbedded rate that is typically charged every eight hours. This charge is used by exchanges to prevent exchange risk imbalances.
A higher demand for leverage by longs (buyers) is indicated by a positive funding rate. The financing rate turns negative when shorts (sellers) need more leverage, which is the exact reverse of the position described above.
The accumulated seven-day financing rate for Bitcoin and Ether is somewhat positive, as was already mentioned. Data show somewhat increased demand from longs (buyers), but not to the point where traders would be compelled to unwind their holdings. For instance, a positive weekly rate of 0.15% is 0.6% monthly, making damage improbable.
The 7-day perpetual futures financing rate for cryptocurrencies, on the other hand, was -0.30%. This rate, which equals 1.2% monthly, shows increased demand from shorts (sellers).
The negative financing rate on altcoins and indications of weak retail demand, as shown by OKX Tether data, are signs that traders are reluctant to invest at the crucial $1.65 trillion market size for cryptocurrencies. Additional price corrections are expected to occur since buyers appear to be holding out for further price drops before buying.
