Bitcoin's Recent Gains Have Traders Calling a Bottom, But Various Metrics Remain Bearish

On May 30, the total crypto market cap gained 4% and is currently within reach of a $1.3 trillion market cap. This move was enough to er...

On May 30, the total crypto market cap gained 4% and is currently within reach of a $1.3 trillion market cap. This move was enough to erase the losses of the previous 7 days and was mainly driven by Bitcoin (BTC) Gain of 4.9% during this period.

Total crypto market capitalization, in billions of dollars. Source: Trading View

Besides Bitcoin, Cardano (ADA) was the only large-cap cryptocurrency that managed to end the week with a positive performance of 4.5%. Meanwhile, Ether (ETH), Binance Coin (BNB), XRP (XRP) and Solana (FLOOR) did not show weekly gains.

Bitcoin’s reversal occurred after the US stock market showed gains for the first time after 7 consecutive negative weeks. The longest losing streak in more than a decade for the S&P 500 was followed by a positive performance of 6.6% at the closing bell on May 22.

According Yahoo! Finance, “a favorable batch of quarterly results from major retailers helped at least temporarily alleviate concerns about the cost of inflationary headwinds that could weigh on profit margins.” For example, Macy’s (M) gained 29.1% during the week, followed by Nordstrom (JWN) with a positive performance of 25.4% and Ross Stores (ROST) up 21.5%.

Curiously, JP Morgan sent out a research note to clients on May 25 which claimed that $38,000 was Bitcoin’s fair value. The global investment bank also said that Terra (LUNA) the collapse did not hurt the demand for crypto venture capital.

On May 23, at the World Economic Forum (WEF) in Davos, Switzerland, PayPal Vice President Richard Nash said the company intention to embrace all possible crypto and blockchain services. After rolling out its Bitcoin trading across the United States in 2020, PayPal continues to expand its digital currency offering.

Below are the winners and losers of the last seven days. While major cryptocurrencies exhibited modest movements, some mid-cap altcoins exhibited high volatility.

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

Synthetix (SNX) rebounded 15.8% after Kwentaa no-slip derivatives trading app powered by Synthetix, reached $325 million in volume.

Helium (HNT) gained 15.2% after details for Improvement Proposal #51 were released on May 27. The change introduces a framework to allow subnets with their own token and their own governance.

STEPN Governance (GMT) loses 14.6% after block users based in mainland China from its mobile application.

Terra Luna Classic (LUC), formerly known as LUNA, fell 12.2% after the South Korean authorities summoned all employees to Terraform Labs as part of a large-scale investigation.

Due to the mixed performance of the altcoin markets, it is worth studying how traders are positioning themselves based on trading indicators and derivatives.

Tether premium shows lack of retail demand

The OKX attachment (USDT) premium is a good indicator of demand for crypto from China-based retail traders. It measures the difference between peer-to-peer (P2P) transactions based in China and the US dollar.

Excessive buying demand tends to pressure the indicator above its fair value. On the other hand, during bear markets, the market supply of Tether is flooded, leading to a discount of 4% or more.

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

Between May 23 and May 30, the Tether premium in terms of CNY averaged a 2% discount, signaling a lack of retail demand. More importantly, the 4% rally in crypto market capitalization on May 30 did not change investor sentiment.

Related: Youngest Crypto Investors Weather Headwinds – and Headlines

Derivative indicators are slightly bearish for altcoins

Perpetual contracts, also known as reverse swaps, have an embedded rate that is typically charged every eight hours. Exchanges use these fees to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) require more leverage. However, the opposite situation occurs when the shorts (shorts) require additional leverage, causing the funding rate to become negative.

Cumulative perpetual futures funding rate as of May 30. Source: Coinglass

Perpetuals reflect mixed sentiment as Bitcoin and Ether maintained a marginally positive (bullish) funding rate, but altcoins signaled the opposite. For example, Solana’s negative weekly rate of 0.20% equals 0.8% per month, which is irrelevant to most derivatives traders.

The data suggests that investors are not rushing to confirm that the recent rally in prices represents a change in trend. As the total crypto market cap passed the $1.3 trillion support, traders are pricing in downside risks. So far, there is no clear indication of a market bottom according to the trading metrics.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.