The overall crypto market cap continues to crumble because the greenback index hits a 20 yr excessive

From a bearish perspective, there’s a good chance that the crypto market entered a descending channel (or wedge) on Aug. 15 after it failed to interrupt above the $1.2 trillion complete market capitalization resistance. Even when the sample isn’t but clearly distinguishable, the final couple of weeks haven’t been optimistic.

Whole crypto market cap, USD billion. Supply: TradingView

For instance, the $940 billion complete market cap seen on Aug. 29 was the bottom in 43 days. The worsening situations have been accompanied by a steep correction in conventional markets, and the tech-heavy Nasdaq Composite Index has declined by 12% since Aug. 15 and even WTI oil costs plummeted 11% from Aug. 29 to Sept. 1.

Buyers sought shelter within the greenback and United States Treasuries after Federal Reserve Chair Jerome Powell reiterated the financial institution’s dedication to comprise inflation by tightening the financial system. In consequence, traders took earnings on riskier belongings, inflicting the U.S. Greenback Index (DXY) to achieve its highest degree in over 20 years at 109.6 on Sept 1. The index measures the greenback’s power in opposition to a basket of high foreign currency.

Extra importantly, the regulatory newsflow stays largely unfavorable, particularly after U.S. federal prosecutors requested inner data from Binance crypto change to look deeper into potential cash laundering and recruitment of U.S. prospects. Since late 2020, authorities have been investigating whether or not Binance violated the Financial institution Secrecy Act, in response to Reuters.

Crypto investor sentiment re-enters the bearish zone

The danger-off perspective brought on by Federal Reserve tightening led traders to count on a broader market correction and is negatively impacting progress shares, commodities and cryptocurrencies.

Crypto Concern & Greed Index. Supply:

The information-driven sentiment Concern and Greed Index peaked on Aug. 14 because the indicator hit a impartial 47/100 studying, which didn’t sound very promising both. On Sept. 1, the metric hit 20/100, the bottom studying in 46, and sometimes deemed a bearish degree.

Under are the winners and losers from the previous seven days as the entire crypto capitalization declined 6.9% to $970 billion. Whereas Bitcoin (BTC) and Ether (ETH) offered a 7% to eight% decline, a handful of mid-capitalization altcoins dropped 13% or extra within the interval.

Weekly winners and losers among the many top-80 cash. Supply: Nomics

eCash (XEC) jumped 16.5% after lead developer Amaury Séchet introduced the Avalanche post-consensus launch on eCash mainnet, anticipated for Sept. 14. The replace goals to deliver 1-block finality and enhance safety in opposition to 51% assaults.

NEXO gained 3.4% after committing a further $50 million to its buyback program, giving the corporate extra discretionary potential to repurchase its native token on the open market.

Helium (HNT) misplaced 29.3% after core builders proposed ditching its own blockchain in favor of Solana’s. If passed, Helium-based HNT, IOT and MOBILE tokens and Data Credits (DCs) would also be transferred to the Solana blockchain.

Avalanche (AVAX) dropped 18.2% after CryptoLeaks released an unverified video showing Kyle Roche, the partner at Roche Freedman, saying that he could sue Solana, one of Avalanche’s top rivals, on behalf of Ava Labs.

Most tokens performed negatively, but retail demand in China slightly improved

The OKX Tether (USDT) premium is a good gauge of China-based retail crypto trader demand. It measures the difference between China-based peer-to-peer (P2P) trades and the United States dollar.

Excessive buying demand tends to pressure the indicator above fair value at 100%, and during bearish markets, Tether’s market offer is flooded and causes a 4% or higher discount.

Tether (USDT) peer-to-peer vs. USD/CNY. Source: OKX

On Oct. 30, the Tether price in Asia-based peer-to-peer markets reached a 0.4% premium, its highest level since mid-June. Curiously, the move happened while the crypto total market cap dropped 18.5% since Aug. 15. Data shows there hasn’t been panic selling from retail traders, as the index remains relatively neutral.

Traders must also analyze futures markets to exclude externalities specific to the Tether instrument. Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

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

Accumulated perpetual futures funding rate on Sept. 1. Source: Coinglass

Perpetual contracts reflected a moderately bearish sentiment as the accumulated funding rate was negative in every instance. The current fees resulted from an unstable situation with higher demand from leverage shorts and those betting on a price decrease. Still, even the 0.70% negative weekly funding rate for Ethereum Classic (ETC) was not enough to discourage short sellers.

Negative regulatory and macroeconomic pin down sentiment

The negative 6.9% weekly performance should be investors’ least worry right now because regulators have been targeting major crypto exchanges. For example, they claim that altcoins should have been registered as securities and that the sector has been used to facilitate money laundering.

Moreover, the weak sentiment metrics and imbalanced leverage data signal investors are worried about the impacts of a global recession. Even though Tether data in Asian markets shows no signs of retail panic selling, there is no evidence of traders having a bullish appetite because the total crypto market cap approached its lowest level in 45 days. Thus, bears have reason to believe that the current descending formation will continue in the upcoming weeks.

The views and opinions expressed here are solely those of the author and don’t essentially replicate the views of Cointelegraph. Each funding and buying and selling transfer includes threat. You need to conduct your individual analysis when making a choice.