Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver lining

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver lining. This is due to the rise of stablecoins: coins that are pegged 1:1 with government-backed assets like gold or fiat currencies. Stablecoins may well be the future of cryptocurrency trading because they offer more protection against market volatility than regular cryptocurrencies

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver lining. The two cryptocurrencies are down about 25% for the week, which is not too bad considering that they have been up over 1,500% this year.。 Read more in detail here: btc moved to exchanges.

The crypto market has seen a significant decline in value this week after Coinbase, the largest U.S. exchange, disclosed a $430 million quarterly net loss and South Korea announced intentions to impose a 20% tax on cryptocurrency profits.

Even for a volatile asset class, the overall global crypto market cap dropped by 39 percent in seven days, from $1.81 trillion to $1.10 trillion. In February 2021, a similar drop in value occurred, resulting in bargains for risk-takers.

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver liningUSD billion in total crypto market capitalisation. TradingView (source)

Despite this week’s volatility, there were a few relief bounces, with Bitcoin (BTC) rising 18 percent from a $25,400 low to the current $30,000 level, and Ether (ETH) rising to $2,100 from a near-year low of $1,700.

According to statistics from the Purpose Bitcoin ETF, institutional investors purchased the drop. The exchange-traded instrument is based in Canada, and on May 12 it added 6,903 BTC, the greatest single-day buy-in ever.

Treasury Secretary Janet Yellen remarked on May 12 that the stablecoin market poses no danger to the country’s financial stability. Yellen added at a hearing before the House Financial Services Committee:

“They pose the same kinds of threats that have been associated with bank runs for decades.”

In only seven days, the overall cryptocurrency market capitalization has dropped 19.8%.

Over the last seven days, the total market capitalisation of all cryptocurrencies has decreased by 19.8%, to $1.4 trillion. However, other cryptocurrencies with a mid-capitalization were crushed, dropping more than 45 percent in a week.

The top gainers and losers among the top 80 cryptocurrencies by market capitalization are shown below.

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver liningThe top-80 coins have weekly winners and losers. Nomics is the source of this information.

The death of a rival algorithmic stablecoin helped Maker (MKR). DAI remained completely operational but TerraUSD (UST) succumbed to the market slump, shattering its peg far below $1.

Terra (LUNA) saw a massive 100 percent drop as the foundation in charge of the ecosystem reserve was obliged to liquidate its Bitcoin holding at a loss and issue billions of LUNA tokens to compensate for the stablecoin’s devaluation below $1.

The total value locked, or the amount of FTM coins put on the ecosystem’s smart contracts, dropped 15.3 percent in one day. Since senior Fantom Foundation team members Andre Cronje and Anton Nell left from the project, Fantom has been suffering.

Retail traders are showing interest in Tether premium.

The OKX Tether (USDT) premium is a proxy for Chinese retail crypto demand. It calculates the difference between USDT peer-to-peer trading in China and the official US dollar.

The indication is above fair value, which is 100 percent, due to excessive purchasing demand. Tether’s market offer, on the other hand, is inundated during weak markets, resulting in a 2 percent or larger discount.

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver liningPeer-to-peer Tether (USDT) vs. USD/CNY Author: OKX

Tether’s premium is at 101.3 percent, which is slightly favorable. Furthermore, no panic has occurred in the last two weeks. Such numbers suggest that Asian retail demand isn’t waning, which is encouraging given that the whole cryptocurrency market value has decreased 19.8% in the last seven days.

What exactly happened? The Terra fiasco reveals vulnerabilities in the cryptocurrency business.

Funding rates for altcoins have also fallen to alarmingly low levels. The embedded rate on perpetual contracts (inverse swaps) is normally charged every eight hours. These are the favourite derivatives of retail traders since their prices closely match normal spot markets.

This charge is used by exchanges to minimize exchange risk imbalances. Longs (buyers) seek additional leverage when the financing rate is positive. When shorts (sellers) need more leverage, the financing rate falls below zero.

Bitcoin and Ethereum had a rough week, but derivatives data reveals a silver liningPerpetual futures financing rate accrued over seven days. Credit: Coinglass

The cumulative seven-day financing rate is generally negative, as you can see. This information suggests that sellers have more power (shorts). For example, Solana’s (SOL) negative 0.90 percent weekly rate is 3.7 percent each month, which is a significant hardship for futures traders.

However, as indicated by the cumulative financing rate, the two major cryptocurrencies did not encounter the same leverage selling pressure. When there is an imbalance produced by extreme pessimism, that rate might quickly fall below -3 percent each month.

The lack of leverage shorts (sellers) in Bitcoin and Ethereum futures markets, as well as minor bullishness from Asian retail traders, can be taken as incredibly positive, particularly after a -19.8% weekly performance.

The author’s thoughts and opinions are purely his or her own and do not necessarily represent those of Cointelegraph. Every investing and trading decision is fraught with danger. When making a choice, you should do your own research.

The “ether price fall” is a result of the ongoing “crypto winter.” The “crypto winter” has seen Bitcoin and Ethereum lose about $30 billion in market cap. However, derivatives data reveals that there is a silver lining to this cloud.

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