The cryptocurrency’s whole market cap hit its highest level in over two months on Jan. 13, after surpassing $900 billion on Jan. 12.

Whereas the 15.5% year-to-date acquire sounds promising, the level remains to be 50% beneath the $1.88 trillion crypto market cap recorded earlier than the Terra Luna ecosystem collapsed in April 2022.

Whole Capitalization of Crypto Markets, USD. Supply: TradingView

“Hopeful skepticism” might be one of the best description of most traders’ sentiment proper now, particularly after current struggles to reclaim a $1 trillion market cap in early November. That rally to $1 trillion was adopted by a 27.6% correction in three days, erasing any bullish momentum merchants may need been anticipating.

Bitcoin (BTC) is up 15.7% year-to-date, however a distinct state of affairs has emerged for altcoins, with a handful of them gaining 50% or extra over the identical interval. Some traders attribute the rally to US consumer worth index (CPI) knowledge launched on Jan. 12, which confirmed the speculation that inflation is falling additional.

Whereas macroeconomic situations might have improved, the state of affairs for cryptocurrency firms appears bleak. New York-based Metropolitan Business Financial institution (MCB) introduced Jan. 9 that it will be closing its crypto belongings vertical, citing adjustments within the regulatory panorama and up to date setbacks within the business. Crypto-related clients accounted for six% of the financial institution’s whole deposits.

On Jan. 12, the Securities and Alternate Commission (SEC) accused cryptocurrency lending agency Genesis World Capital and crypto alternate Gemini of providing unregistered securities by way of Gemini’s “earn” program.

A remaining blow got here on Jan. 13 after Crypto.com introduced a recent wave of layoffs on Jan. 13, lowering its world workforce by 20%. Different crypto exchanges that not too long ago introduced job cuts over the previous month embody Kraken, Coinbase, and Huobi.

Regardless of the horrible information circulate, macro tailwinds in favor of threat belongings ensured that solely UNUS SED (LEO) closed the primary 13 days of 2023 within the purple.

Weekly winners and losers among the many high 80 cash. Supply: nomics

Lido DAO (LDO) is up 108% as traders anticipate the upcoming Ethereum Shanghai improve, which is able to enable Ether to be withdrawn to spice up demand for liquid staking protocols.

Aptos (APT) gained 98% after some decentralized purposes began to extend in quantity, together with Liquidswap DEX, Ditto Finance Staking and Yield, and NFT market Topaz Market.

Optimism (OP) surged 70% after Layer 2 community exercise picked up and, together with its competitor Arbiturm, outperformed Ethereum’s main-chain transactions.

Leverage demand is balanced between bulls and bears

Perpetual contracts, often known as inverse swaps, have an embedded price that’s usually calculated each eight hours. Exchanges use this payment to keep away from imbalances in alternate price threat.

A constructive funding price signifies that longs (patrons) are demanding extra leverage. Nevertheless, the other state of affairs happens when quick sellers (sellers) want extra leverage, making the funding price adverse.

Perpetual futures 7-day cumulative funding price on January thirteenth. Supply: Coinglass

The 7-day funding price was close to zero for bitcoin and altcoins, which means the information suggests a balanced demand between leveraged longs (patrons) and shorts (sellers).

When bears pay 0.3% per week to take care of their leveraged bets on Solana (SOL) and BNB, that provides as much as simply 1.2% per thirty days – which is irrelevant to most merchants.

Associated: Bitcoin worth surges to $19K however analysts say a retest of $17.3K may very well be subsequent

Dealer demand for impartial to bullish choices has skyrocketed

Merchants can gauge general market sentiment by measuring whether or not extra exercise is coming from name (purchase) choices or put (sell) choices. Generally, name choices are used for bullish methods whereas put choices are used for bearish methods.

A put-to-call ratio of 0.70 signifies that the open curiosity of the put choices lags the extra bullish calls by 30%, which is bullish. In distinction, an indicator of 1.40 favors put choices by 40%, which might be thought-about bearish.

BTC possibility quantity put-to-call ratio. Supply: laevitas.ch

Between January 4th and sixth, the protecting put choices dominated the area because the indicator surged above 1. The transfer finally subsided and the other state of affairs arose as demand for impartial to bullish name choices had been in extra since January. 7.

The dearth of leverage shorts and demand for protecting places recommend an uptrend

Given the 15.7% acquire since early 2023, derivatives metrics replicate zero indicators of demand for leveraged shorts or protecting put choices. Whereas the bulls rejoice that the $900 billion whole market cap resistance met little resistance, derivatives metrics present that the bears are nonetheless patiently awaiting an entry level for his or her shorts.

Given the bearish information from the market, the bulls’ most important hope stays solely inside a benign macro surroundings, which largely is determined by how retail gross sales knowledge report subsequent week.

China can also be anticipated to launch its financial knowledge on Jan. 16, and the US will do the identical on Jan. 18. One other potential influence on the value may very well be the UK CPI print resulting from be introduced on January 18th.

The views, ideas, and opinions expressed herein are solely these of the authors and don’t essentially replicate or characterize the views and opinions of Cointelegraph.

This text doesn’t include any funding recommendation or advice. Each funding and trading transfer includes threat and readers ought to do their very own analysis when making a choice.