The cryptocurrency market capitalization passed through the $1 trillion barrier on January 13, just two months after reaching its peak in November. Year-to-date, the market has gained 15.5%, although this is still 50% lower than its April 2022 peak of $1.88 trillion.
Most investors are exhibiting “hopeful skepticism”, especially considering the 27.6% correction that occurred three days after the market hit its $1 trillion mark in early November. Bitcoin (BTC) is currently up 15.7% year-to-date, although some altcoins are seeing even greater growth of 50% or more.
The rebound is attributed by investors to the U.S. Consumer Price Index Data from the CPI released January 12, which showed that inflation was still declining. However, this good news for the macroeconomic environment has not translated into good news for crypto businesses, as many have recently announced layoffs.
New York-based Metropolitan Commercial Bank (MCB) announced on Jan. 9 that it was shutting down its crypto asset division due to regulatory changes and recent losses. Other exchanges, such as Kraken, Coinbase?, and Huobi, have also cut jobs in the last month.
UNUS SED (LEO) closed the first 13 days of January in the red, while Lido DAO (LDO) rose 108% in anticipation of a new Terra-Luna ecosystem. Aptos (APT) gained 98% following the launch of the NFT Topaz Market, and Optimism (OP) was up 70% after its layer 2 network detected activity.
Leverage Demand is Balanced Between Bears and Bulls
Perpetual futures have an 8-hour funding rate, which creates a fee to avoid currency risk imbalances. A positive funding ratio suggests that long buyers require more leverage, while a negative one indicates that short sellers are in a better position. Over the past 7 days, the funding rate has been very close to zero, suggesting that demand is balanced between bear and bull traders.
For Bitcoin, Altcoins, and long-term (buy) leverage positions, the data suggests a balanced demand. The bears are charging a 0.3% fee per week, which is only 1.2% per month. This is insignificant for most traders.
Trader Demand for Bullish Options is on the Rise
The ratio of put-to-call options is a good measure of overall market sentiment. Generally, call options are used in bullish strategies and put options are used in bearish ones. A ratio of 0.70 indicates that the put option open interest is at 30% behind the most bullish calls, which is bullish. Conversely, a value of 1.40 suggests that the option to put options is at 40%, which could be considered bearish.
Between January 4-6, the indicator rose above 1, suggesting that the market was dominated by protective puts. This was followed by a surge in demand for neutral bullish put options on January 7.
Lack of Hedges and Leveraged Shorts Point to an Upward Trend
The 15.7% increase since the beginning of the year can be attributed to derivatives metrics, which show no demand for shorts or protective puts. Bulls may take comfort from the fact that the $900 billion market cap resistance was not met with much resistance, but derivatives metrics indicate that bears are still patiently waiting for an entry point to their short positions.
Investor sentiment will be impacted by several macroeconomic reports next week, including U.S., Chinese and U.
