Total cryptocurrency market cap shows strength even after consolidation and Fed rate hike

The cryptocurrency has been in a bearish trend since mid-August after it failed to surpass the $1.2 trillion market cap resistance. Even with the current downtrend and a brutal 25% correction, it wasn’t enough to break the three-month uptrend.

The total value of the crypto markets fell 7.2% to $920 billion in the seven days leading up to September 21. Investors wanted to play it safe ahead of a meeting of the Federal Open Market Committee, which decided to increase the interest rate by 0.75%.

Total cryptocurrency market cap, in billions of US dollars. Source: TradingView

By increasing the cost of cash borrowing, the monetary authority aims to curb inflationary pressure while increasing the burden on consumer finance and corporate debt. This explains why investors are staying away from risky assets, including the stock, forex, commodity and cryptocurrency markets. For example, WTI oil prices have fallen 6.8% since September 14, and the MSCI China stock market index is down 5.1%.

Ether (ETH) also saw a 17.3% retracement over the seven-day period and many cryptocurrencies performed worse. The integration of the Ethereum network and its subsequent impact on other GPU-minable coins caused some skewed results among the worst weekly performers.

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

Chiliz (CHZ) is up 21.5% after a token launch of successful fans of the MIBR esports team and the VASCO football team from Brazil.

XRP gained 16.6% after Ripple Labs called for a federal judge to immediately rule whether the company’s XRP token sales violated US securities laws.

ApeCoin (APE) has gained 15% as the community anticipates the launch of a staking program, which will be Hinge By Horizen Labs on Sept 22.

RavenCoin (RVN) and Ethereum Classic (ETC) reclaimed most of their gains from the previous week as investors realized that hash rate gains from Ethereum miners did not necessarily translate into higher adoption.

The merchants’ appetite did not fade despite the correction

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

Excessive buying demand tends to pressure the index above fair value at 100%, and during bear markets, the Tether market supply plunges, causing a discount of 4% or higher.

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

Tether’s premium currently stands at 100.7%, the highest level since June 15. While still below neutral territory, the index showed a modest improvement over the past week. Given that the cryptocurrency market is down 7.2%, this data should be considered a victory.

Perpetual contracts, also known as reverse swaps, have a built-in rate that is typically charged every eight hours. Exchanges use these fees to avoid misalignments in exchange risk.

A positive funding rate indicates that longer contracts (buyers) require more leverage. However, the opposite situation occurs when short positions (sellers) require additional leverage, causing the financing rate to turn negative.

Accumulated future funding rate on September 21. Source: Coinglass

As shown above, the seven-day cumulative funding rate was negative for each altcoin. This data indicates an increased demand for short positions (sellers), although it can be excluded in the case of Ether because investors aiming for free forks during the consolidation are likely to buy ETH and sell futures to hedge the position.

More importantly, Bitcoin’s funding rate has remained somewhat positive during a week of lower prices and potentially bearish news from the Federal Reserve. Now that that crucial decision has been made, investors tend to avoid placing new bets until some new data provides insights into how to adjust the economy.

Overall, the funding rate for Tether and futures is not showing any signs of fatigue, which is positive considering how poorly the crypto markets are doing.

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