- May 8, 2023
- Posted by: [email protected]
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The cryptocurrency market has experienced an unusual level of stability over the past two weeks, with a trading range of only 7.1%. This is due to a lack of risk appetite from investors who are waiting for more regulatory clarity, particularly in the United States. As a result, the total crypto market capitalization fell by 1% to $1.2 trillion over the seven days ending May 4, with Bitcoin falling by 1.1%, Ethereum by 0.2%, and BNB by 1.4%.
Regulatory uncertainty is weighing down the market, with the Coinbase exchange facing a legal threat from the US Securities and Exchange Commission (SEC) for possible violations of securities laws. However, there has been a recent court decision in favor of Coinbase, with the SEC instructed to clarify security rules for digital assets within 10 days. On the other hand, the banking crisis has not dissipated, with PacWest Bancorp considering a buyout due to the majority of its loan book being dedicated to commercial real estate and residential mortgages.
The recent sideways trend in the crypto market suggests that investors are hesitant to place new bets until there is more clarity on the US Treasury’s injection of liquidity to contain the banking crisis, which favors inflation and positive momentum for scarce assets. The funding rate for Bitcoin and Ethereum was neutral, indicating balanced demand from leveraged longs and shorts, while BNB was an exception with shorts paying 1.4% per week, indicating bearishness.
The market sentiment can be gauged by measuring whether more activity is going through call or put options. The expiration of options can have a significant impact on the market, particularly if there are a large number of contracts involved. The put-to-call ratio for Bitcoin options volume has been below 0.90 since April 26, indicating a higher preference for neutral-to-bullish call options. Moreover, there has been no significant surge in demand for protective put options even after Bitcoin crashed 7.8% on May 1, indicating that traders are not betting on a crypto price crash.
It remains unclear whether the total market capitalization will be able to break through the $1.22-trillion barrier, but professional traders are not betting on a crypto price crash. Investors seem hesitant to place additional bets until there is clarity on whether the US Treasury will continue to bail out the troubled regional bank sector.
