Bitcoin and Altcoins Rise, But Upcoming Macro Events May Limit Rally

Bitcoin and Altcoins Rise, But Upcoming Macro Events May Limit Rally

Gains of 13% in the six days to September 12 brought the total crypto market cap closer to $1.1 trillion, but that was not enough to break the downward trend. As a result, the overall trend over the past 55 days has been bearish, with the last test of support on September 7 at a total market capitalization of $950 billion.

Total crypto market capitalization, USD. Source: Trading View

An improvement in traditional markets accompanied the recent 13% rally in the crypto market. The tech-heavy Nasdaq Composite Index has gained 6.2% since Sept. 6 and WTI oil prices have risen 7.8% since Sept. 7. This data reinforces the high correlation to traditional assets and highlights the importance of closely monitoring macroeconomic conditions.

The correlation metric ranges from a negative 1, which means some markets are moving in opposite directions, to a positive 1, which reflects a perfectly symmetrical move. A disparity or lack of relationship between the two assets would be represented by 0.

Nasdaq futures and 50-day Bitcoin/USD correlation. Source: Trading View

As noted above, the Nasdaq Composite Index and Bitcoin 50-Day Correlation currently sit at 0.74, which has been the norm throughout 2022.

The Fed’s September 21 decision will set the tone

Stock investors are eagerly awaiting the US Federal Reserve meeting on September 21, when the central bank is expected to raise interest rates again. With the market consensus for a third consecutive rate hike of 0.75 percentage points, investors are looking for signs that the economic tightening is waning.

A report on the US Consumer Price Index, a relevant measure of inflation, is due on September 13 and on September 15 investors’ attention will be glued to retail sales and industrial production data in the United States.

Currently, regulatory sentiment remains largely unfavorable, particularly after U.S. Securities and Exchange Commission (SEC) Chief Enforcement Officer Gurbir Grewal said the financial regulator would continue to investigate and take action. enforcement actions against crypto companies.

Altcoins rallied, but pro traders resisted leverage on longs

Below are the winners and losers of the total crypto market cap for the past week, up 8.3% to $1.08 trillion. Bitcoin (BTC) stood out with a 12.5% ​​gain, driving its dominance rate to 41.3%, the highest since August 9.

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

Terra (LUNA) jumped 107.7% after Terra approved a proposal on September 9 for an additional airdrop of over 19 million LUNA tokens through October 4.

RavenCoin (RVN) gained 65.8% after the network’s hash rate hit 5.7 TH per second, the highest level since January 2022.

Cosmos (ATOM) gained 24.6% after crypto research firm Delphi Digital shifted its research and development arm’s focus to the Cosmos ecosystem on September 8.

Even with these gains, a single week of positive performance is not enough to interpret the positioning of professional traders. Those interested in whale tracking and market markers should analyze the derivatives 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.

Cumulative 7-day perpetual futures funding rate on September 12. Source: Coinglass

Perpetual contracts reflected neutral sentiment, as the cumulative funding rate was relatively stable in most cases. The only exceptions were Ether (ETH) and Ether Classic (ETC), although a weekly cost of 0.30% to maintain a short position (bearish) should not be considered relevant. Additionally, these cases are likely related to the Ethereum merger, the transition to a proof-of-stake network expected on September 15.

Related: Glimpses of positive momentum in an overall bearish market? Report

Chances of a downtrend are still high

The positive weekly performance of 8.3% cannot be seen as a change in trend, as the move was likely related to the rally in traditional markets. Also, one would assume that investors are likely to assess the risk of further regulatory impact after Gary Gensler’s remarks.

There is still uncertainty over potential macro triggers and traders should not add risk ahead of important events like the FOMC interest rate decision. For this reason, the bears have reason to believe that the prevailing long-term downward formation will resume in the coming weeks.

Professional traders’ lack of interest in leveraged buys is evident in the neutral term funding rate and is another sign of negative investor sentiment. If the total crypto market cap tests the bearish pattern support level at $940 million, traders should expect a 12.5% ​​price drop from the current level of $1.08 billion. .

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.