Mixed Signals For Cryptocurrencies As Market Stagnates At $1.18 Trillion
Crypto Market Stagnates at $1.2 Trillion
The overall value of cryptocurrencies in the market has stopped increasing at around $1.2 trillion.
However, information about cryptocurrency-based financial contracts indicates that investors who anticipate an upward trend are getting ready for the next significant surge.
In the second week of March, the collective value of cryptocurrencies in the market rose by 11%. However, it has since struggled to break through the $1.2 trillion resistance level.
This level was also reached in 2022 but was followed by a significant decline of 19.7% to $960 billion over 14 days.
In the period of sideways movement between this week and the last, Bitcoin’s value remained relatively stable, with a slight increase of 0.3%.
On the other hand, the value rose by 1.6% as compared to its previous value.
The Impact of Fed’s Monetary Policy on Short-Term Momentum
A factor contributing to positive short-term momentum is the shift in the US Federal Reserve’s financial policy.
The Fed had to inject $393 billion into the banking system this month to provide necessary short-term loans to struggling banks.
The aim of this move was to combat inflation, which has had a significant impact on the cost of living. It has also hindered economic growth in the United States.
The Federal Reserve’s recent decision to increase its balance sheet by providing short-term loans to banks goes against its previous practices.
Previously the Fed reduced its holdings of debt instruments, mortgage-backed securities, and exchange-traded funds over a nine-month period.
This reversal of strategy is viewed as a positive development for risky assets. The Fed is stepping in to support struggling banks and hedge funds. As a result, there is an initial bullish sentiment in the market.
Regulatory Risks Intensify for Coinbase Following Wells Notice from SEC
The regulatory risks facing the cryptocurrency industry intensified following the news that Coinbase had received a Wells notice from the Securities and Exchange Commission.
The notice indicates that the regulator is considering potential enforcement actions against Coinbase’s staking program, wallet services, and certain digital asset listings.
The primary source of uncertainty arises from the lack of clarity on which assets can be considered securities. This makes it difficult to predict the regulator’s next move.
Mixed Signals For Cryptocurrencies
These conflicting factors could be the major reason for the collective value of cryptocurrencies hovering around the $1.18 trillion mark in the market.
Nevertheless, insights gained from derivatives data provide strong indications for an upward trend toward $1.35 trillion, which could prompt a $1 trillion threshold level.
The overall value of cryptocurrencies in the market has remained steady, with XRP and Litecoin experiencing an increase of 22% and 17%, respectively.
The boost in XRP’s value can be credited to investors’ positive outlook on Ripple’s legal fight with the SEC, which is ongoing.
Meanwhile, analysts attribute the rise in Litecoin’s value to its upcoming halving event, where rewards for mining new blocks will be reduced by half.
Options traders Show Confidence in Crypto Market Above $1 trillion
To determine the market’s overall sentiment, traders often analyze whether there is more activity in buying or selling. Typically, call options are employed when a trader expects the prices of an asset to increase.
On the other hand, put options are used when the traders expect the price of an asset to decrease. When the put-to-call ratio is at 0.70, it suggests that there are more open positions for call options than put options.
This indicates that there is bullish sentiment in the market. Conversely, a put-to-call ratio of 1.40 signifies a greater number of open positions for put options as opposed to calling options.
This thus is generally seen as a bearish signal.
Since earlier this month the put-to-call ratio for Bitcoin has either been balanced or inclined towards call options. This is indicative of a neutral-to-bullish sentiment in the crypto market. Despite Bitcoin’s recent price increase of 41%, options traders’ behavior suggests that they’re not overly worried about a potential price correction.
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