An improvement in traditional markets has accompanied the recent 13% cryptocurrency market rally. The tech-rich Nasdaq Composite Index has gained 6.2% since September 6 and WTI oil prices have risen 7.8% since September 7. These data reinforce the high correlation versus traditional assets and underline the importance of closely monitoring macroeconomic conditions.
The correlation metric ranges from a negative 1, which means selected markets are moving in opposite directions, to a positive 1, which reflects perfectly symmetrical movement. A disparity or lack of relationship between the two assets would be represented by 0.
As shown above, the Nasdaq composite index and 50-day Bitcoin correlation currently stand at 0.74, which has been the norm throughout 2022.
The Fed’s decision of September 21 will set the mood
Equity market investors look forward to the US Federal Reserve meeting on September 21, where the central bank is expected to raise interest rates again. Although the market consensus is a third consecutive rate hike of 0.75 percentage points, investors are looking for signs that the economic squeeze is fading.
A report on the US consumer price index, a relevant inflation metric, is expected on September 13 and September 15, investor attention will be glued to US retail sales and industrial production data .
Currently, regulatory sentiment remains largely unfavorable, especially after US Securities and Exchange Commission (SEC) enforcement director Gurbir Grewal said the financial regulator will continue to investigate and take action. law enforcement against cryptocurrency companies.
Altcoins have risen, but professional traders have been resilient to take advantage of longs
Below are the winners and losers of last week’s total cryptocurrency market cap, an 8.3% gain to $ 1.08 trillion. Bitcoin (BTC) stood out with a 12.5% gain, which took its dominance rate to 41.3%, the highest since August 9.
Terra (LUNA) jumped 107.7% after Terra approved a proposal on September 9 for an additional airdrop of more than 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 the focus of its R&D arm 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 tracking whales and market indicators should analyze the derivatives markets. Perpetual contracts, also known as reverse swaps, have a built-in fee usually charged every eight hours. Exchanges use this fee to avoid currency risk imbalances.
A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to go negative.
Perpetual contracts reflected neutral sentiment as the accumulated funding rate was relatively flat in most cases. The only exceptions were Ether (ETH) and Ether Classic (ETC), although a weekly cost of 0.30% to maintain a short (bear) position should not be considered relevant. Furthermore, these cases are likely related to the Ethereum merger, the transition to a proof-of-stake network scheduled for September 15.
Related: Glimpses of positive momentum in an overall bear market? Report
The odds of a downtrend are still high
The positive weekly performance of 8.3% cannot be considered a change in trend considering that the move was likely linked to the recovery of traditional markets. Furthermore, it could be assumed that investors risk discounting the risk of further regulatory impact following Gary Gensler’s remarks.
There is still uncertainty about potential macroeconomic triggers and traders are unlikely to add risk before major events such as the FOMC interest rate decision. For this reason, bears have reason to believe that the prevailing long-term descending formation will resume in the coming weeks.
Professional traders’ lack of interest in leveraged long positions is evident in the neutral funding rate of futures and this is another sign of negative sentiment from investors. If the total market capitalization of cryptocurrencies tests the support level of the bearish pattern at $ 940 million, traders should expect the price to drop by 12.5% from the current level of $ 1.08 billion.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your research when making a decision.