Total cryptocurrency market shrinks to $850 billion as data shows further downside


From November 8 to 10, the total capitalization of the cryptocurrency market decreased by 24% and reached a minimum of $770 billion. However, after the initial panic subsided and the cancellation of mandatory futures contracts no longer pressured asset prices, there was a sharp 16% recovery.

The total volume of the cryptocurrency market in US dollars, 2 days. Source: TradingView

This week’s decline was not the first rodeo below the market’s $850 billion market cap level, and a similar pattern emerged in June and July. In both cases, support showed strength, but the $770 billion intraday low on November 9 was the lowest level since December 2020.

The 17.6% week-to-week drop in total market capitalization was largely driven by Bitcoin (BTC)’s 18.3% loss and Ether’s (ETH) 22.6% negative price movement. Again, the price impact was more severe on altcoins, with 8 of the top 80 coins losing 30% or more during this period.

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

FTX Token (FTT) and Solana (SOL) were heavily affected by cancellations following the bankruptcy of FTX exchange and Alameda Research.

Aptos (APT), however, fell 33% denies the rumours Aptos Labs or Aptos Foundation treasures were held by FTX.

Stablecoin demand in Asia remained neutral

The USD Coin (USDC) premium is a good measure of China-based cryptocurrency retail trader demand. It measures the difference between China-based peer-to-peer trading and US dollars.

Overbought demand puts 100% pressure on the indicator above fair value, and during bear markets, the stablecoin’s market supply tends to drop 4% or more.

USD/CNY against USDC peer-to-peer. Source: OKX

Currently, the USDC premium is at 100.8% compared to the previous week. Therefore, there was no panic selling from Asian retail investors despite a 24% drop in the overall cryptocurrency market capitalization.

However, this data should not be taken as bullish as the USDC buying pressure suggests that traders are seeking refuge in stablecoins.

Few leveraged buyers use the futures markets

Standing contracts, also known as reverse swaps, typically have an embedded exchange rate that settles every eight hours. Exchanges use this fee to hedge currency risk imbalances.

A positive funding ratio indicates that long-term (buyers) require more leverage. However, the opposite occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Fixed futures 7-day funding rate on November 11. Source: Coinglass

As described above, the 7-day funding rate is slightly negative for the two largest cryptocurrencies, and the data points to excessive demand for shorts (sellers). Although there is a weekly cost of 0.40% to hold open positions, this is not a concern.

Traders should analyze options markets to understand whether whales and arbitrage tables place higher bets on bullish or bearish strategies.

Related: Solana TVL drops by almost a third as FTX turmoil shakes ecosystem: Finance Redefined

The puts/calls ratio indicates a deterioration in sentiment

Traders can gauge overall market sentiment by gauging whether more activity is coming from call (buy) or put (sell) options. Generally, call options are used for bullish strategies and put options are used for bearish strategies.

A strike ratio of 0.70 indicates that open interest put options lag more than 30% of bullish calls and are therefore bullish. In contrast, the 1.20 indicator favors 20% put options, which can be considered bearish.

BTC options call rate. Source: Cryptorank.io

As bitcoin fell below $18,500 on November 8, investors rushed to seek protection on the downside. As a result, the recall rate subsequently increased to 0.65. Still, as the current 0.63 level shows, the Bitcoin options market is more heavily populated with neutral than bearish strategies.

Coupled with the lack of stablecoin demand in Asia and the negatively skewed standing contract premiums, it’s clear that traders aren’t comfortable that the support for the $850 billion market cap will last in the near term.