The total crypto market capitalization surpassed $1 trillion on July 18 after an agonizing 35-day stay below a key psychological level. Over the next seven days, Bitcoin (BTC) traded flat around $22,400 while Ether (ETH) faced a 0.5% correction to $1,560.

Total capitalization of the cryptocurrency market, billion US dollars. Source: Trading View
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Total crypto cap closed on July 24 at $1.03 trillion, representing a modest negative 0.5% move over seven days. The apparent stability is skewed towards the unchanged performance of BTC and Ether and the value of $150 billion of stablecoins. The broader data hides the fact that seven of the top 80 coins have fallen by 9% or more over this period.

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Although the chart shows support at $1 trillion, it will take some time before investors regain their confidence to invest in cryptocurrencies, and the actions of the US Federal Reserve may have the biggest impact on price action.

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In addition, the sit-and-wait mentality may be a reflection of important macroeconomic events planned for the week ahead. Overall, worse-than-expected data tends to raise investor expectations for expansion measures that are beneficial to riskier assets like cryptocurrencies.

The Federal Reserve policy meeting is scheduled for July 26 and 27, and investors expect the US central bank to raise interest rates by 75 basis points. Moreover, the second quarter of the US gross domestic product (GDP), the broadest measure of economic activity, will be released on July 27.

$1 trillion is not enough to inspire confidence

Investor sentiment has improved since July 18, as evidenced by the data-driven fear and greed index. The indicator is currently at 30 out of 100, up from 20 on July 18 when he was in the “extreme fear” zone.

Cryptocurrency index of fear and greed. Source: www.alternative.me

It should be noted that despite the fact that the total cryptocurrency market capitalization of $1 trillion has been restored, the mood of traders has not improved much. Below are the winners and losers from July 17 to July 24.

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

Arweave (AR) is facing a technical correction of 20.6% after an impressive 58% growth from July 12 to 18 after the network-based file sharing solution exceeded 80 terabytes (TB) of data storage.

Polygon (MATIC) shares fell 11.7% after Ethereum co-founder Vitalik Buterin supported the implementation of the zero-knowledge Rollups technology currently in development for Polygon.

Solana (SOL) corrected 9% after demand for the smart contract network could be negatively impacted by Ethereum’s upcoming transition to Proof-of-Stake consensus.

Retail traders are not interested in bullish positions

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

Excessive buying demand tends to put pressure on the indicator above fair value at 100%, and during bear markets, Tether’s market supply is overwhelmed and results in a discount of 4% or more.

Tether (USDT) P2P vs. USD/CNY. Source: OKH

Tether has been trading at a slight discount on Asian peer-to-peer markets since July 4th. Even the 25% rally in total market capitalization between July 13 and 20 was not enough to show excessive buying demand from retail traders. For this reason, these investors continued to leave the crypto market, seeking refuge in fiat currency.

It is necessary to analyze the performance of crypto derivatives in order to exclude external factors specific to the stablecoin market. For example, perpetual contracts have an embedded rate that is typically charged every eight hours. Exchanges use this fee to avoid currency risk imbalance.

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

The cumulative funding rate of perpetual futures on July 24th. Source: Coinglass.

Derivatives contracts show modest demand for long (bullish) leveraged positions in bitcoin, ether and cardano. However, nothing is out of the norm after a weekly funding of 0.15% equals a monthly cost of 0.6%, so no incident. Solana, XRP and Ether Classic (ETC) saw the opposite move, but not enough to cause concern.

As investors’ attention shifts to global macro data and the Fed’s response to deteriorating conditions, the window of opportunity for cryptocurrencies to emerge as a credible alternative is shrinking.

Crypto traders are signaling fear and a lack of buying leverage, even despite a 67 percent correction from the November 2021 peak. Overall, data on derivatives and stablecoins shows a lack of confidence in supporting a $1 trillion market cap.

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