Total Crypto Market Cap Surpasses $1,000,000, and Data Suggests More Upsides Are in Store

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Despite the recent negative crypto and macro news flow, the total cryptocurrency market capitalization topped $1 trillion on January 21. An encouraging sign is that derivatives metrics are not showing increased demand from bearish traders at this time.

Total crypto market capitalization in USD, 1 day. Source: Trading View

The price of Bitcoin (BTC) gained 8% on the week, stabilizing near the $23,100 level at 18:00 UTC on January 27 as markets weighed the potential impact of Genesis Capital’s bankruptcy on January 19.

One of the areas of concern is that Genesis Capital’s largest debtor is Digital Currency Group (DCG), which happens to be its parent company. Therefore, the management of Grayscale funds could be at risk, so investors do not know if the assets of Grayscale Bitcoin Trust (GBTC) could be liquidated. The investment vehicle currently holds over $14 billion in Bitcoin positions for its holders.

A U.S. appeals court is set to hear arguments in Grayscale Investment’s lawsuit against the Securities and Exchange Commission (SEC) on March 8. The fund manager questioned the SEC’s decision to deny the launch of their asset-backed exchange-traded fund (ETF). .

Regulatory concerns also negatively impacted markets after South Korean prosecutors sought an arrest warrant for Bithumb exchange owner Kang Jong-Hyun. On January 25, the Seoul Southern District Attorney’s Office’s 2nd Financial Investigation Division convicted Kang and two Bithumb executives of engaging in fraudulent illegal transactions.

The weekly 7% increase in total market capitalization was dampened by the negative 0.3% price movement of Ether (ETH). Still, bullish sentiment had a significant impact on altcoins, with 11 of the top 80 coins gaining 18% or more over the period.

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

Aptos (APT) gained 91% after the smart contract network’s Total Value Locked (TVL) hit a record $58 million, powered by PancakeSwap DEX.

Fantom (FTM) rebounded 50% after announcing its new database system, Carmen, and a new Fantom virtual machine, Tosca.

Optimism (OP) posted gains of 21% after a surge in trading volumes during an NFT incentive program called Optimism Quest.

Leverage demand slightly favors bulls

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.

Perpetual futures accumulated the 7-day funding rate on January 27. Source: Coinglass

The 7-day funding rate was positive for both Bitcoin and Ethereum, which means the data points to slightly higher demand for long positions (buyers) compared to short positions (sellers). Still, a weekly funding cost of 0.25% is not enough to discourage leveraged buyers.

Interestingly, Aptos was the only exception as the altcoin had a negative weekly funding cost of 0.6%, meaning short sellers were paying to keep their positions open. This move can be explained by the 91% rally in 7 days and this suggests that the sellers are expecting some sort of technical correction.

The put/call option ratio shows no sign of fear

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 1.40 favors put options by 40%, which can be considered bearish.

Put-call ratio of BTC options volume. Source: laevitas.ch

Even though Bitcoin price failed to break through the $23,300 resistance, demand for bullish calls has outpaced neutral to bearish puts since Jan. 6.

Currently, the put-to-call volume ratio is close to 0.50 as the options market is more heavily populated with neutral to bullish strategies, favoring call options by 50%.

Related:Bitcoin Will Hit $200,000 Ahead of Next $70,000 Bear Market Cycle

Derivatives markets point to further upside potential

After the third straight week of gains, which total 40% year-to-date excluding stablecoins, there is no sign of demand from short sellers. More importantly, leverage indicators show that bulls are not using excessive leverage.

Derivatives markets are pointing to further upside potential and even if the market revisits the January 18 market cap of $950 billion, there is no reason to panic. Currently, Bitcoin options markets are showing whales and market makers favoring neutral to bullish strategies.

Ultimately, the odds are in favor of those betting that the total market capitalization of $1 trillion will hold, paving the way for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are the sole authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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