The total market capitalization of cryptocurrencies reached its highest level in more than two months on January 13 after crossing the $900 billion mark on January 12.
While the year-to-date gain of 15.5% looks promising, the level is still 50% below the $1.88 trillion cryptocurrency market cap seen before the Terra-Luna ecosystem crash in April 2022.
Total cryptocurrency market capitalization, in USD. Source: TradingView
“Hopeful skepticism” is probably the best description of most investors’ feelings right now, especially after recent struggles to regain a trillion-dollar market capitalization in early November. This rally to $1 trillion was followed by a correction of 27.6% in three days and negated any bullish momentum traders were expecting.
It has gained 15.7% year-to-date, but a different scenario has emerged for altcoins, with a handful of them gaining 50% or more in the same period. Some investors attribute the rise to US Consumer Price Index (CPI) data released on January 12, which confirmed the hypothesis that inflation continues to decline.
While macroeconomic conditions may have improved, the situation for cryptocurrency companies looks bleak. New York-based Metropolitan Commercial Bank (MCB) announced on January 9 that it would close its crypto-asset capital, citing changes in the regulatory landscape and recent setbacks in the industry. Cryptocurrency-related clients accounted for 6% of the bank’s total deposits.
On January 12, the US Securities and Exchange Commission (SEC) charged cryptocurrency lending firm Genesis Global Capital and cryptocurrency exchange Gemini by offering unregistered securities through Gemini’s Earn program.
The latest blow came on January 13th after Crypto.com announced a new wave of layoffs on January 13th, cutting its global workforce by 20%. Other cryptocurrency exchanges that recently announced job cuts last month include Kraken, Coinbase, and Huobi.
Despite the apocalyptic news flow, macroeconomic tailwinds favoring risky assets ensured that UNUS SED (LEO) only closed the first 13 days of 2023 in the red.
Weekly winners and losers among the top 80 coins. Source: Nomex
Lido DAO (LDO) is up 108% as investors anticipate an upcoming Ethereum Shanghai upgrade that enables Ether withdrawals to drive demand for liquid staking protocols.
Stay safe in Web3. Learn more about Web3 Antivirus →
Aptos (APT) rallied 98% after some decentralized applications began increasing trading volume, including decentralized exchange Liquidswap (DEX), Ditto Finance and yield and non-perishable tokens (NFT) on Topaz Market.
Optimism (OP) gained 70% after the layer-2 network became active and, along with its competitor Arbiturm, surpassed the main Ethereum transaction chain.
The demand for leverage is balanced between bulls and bears
Perpetual contracts, also known as reverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use these fees to avoid imbalances in exchange risk.
A positive funding ratio indicates that long contracts (buyers) require more leverage. However, the opposite situation occurs when short positions (sellers) require additional leverage, causing the financing rate to turn negative.
Perpetual futures contracts accumulated at a 7-day funding rate on January 13th. Source: Coinglass
The 7-day funding rate was close to zero for Bitcoin and altcoins, which means the data indicates a balanced demand between long buy (buyers) and sell (seller) contracts.