Total cryptocurrency market capitalization fell to $1.02 trillion on June 15, its lowest level in three months. But while the resilience of the derivatives market and price gains at the end of the week amid uncertainty in stablecoin reserves provides hope for bulls, it might be too early to celebrate.
Regulatory conditions for cryptocurrencies deteriorate
The past few weeks have seen a bearish trend fueled by regulatory uncertainty. Last week, Bitcoin (BTC) and bnb got an increase of 2.5%, but XRP fell 5.2%, and Ether (ETH) fell by 0.7%.
Note that the 10-week pattern has tested the support level in multiple instances, indicating that the bulls will have a hard time breaking out of the downtrend as regulatory conditions have worsened around the world.
For starters, based in New York derivatives exchange Bakkt is delisted sunny (SUN), polygon (MATIC) and Cardano (ADA) due to recent regulatory developments in the United States. The decision follows last week's lawsuits filed by the Securities and Exchange Commission (SEC) against cryptocurrency exchanges Binance and Coinbase.
Related: Why is the crypto market rising today?
Most recently, on June 16, Binance has been the subject of a preliminary investigation in France since February 2022. The French-based arm of the crypto exchange was reportedly unable to obtain an operating license and illegally offered its services to French clients. In addition, the exchange lacked Know your customer procedures, according to regulators.
Also June 16 Binance announced its exit from the Netherlands, and users are asked to withdraw their funds as soon as possible. The decision to exit the Dutch market came after the exchange failed to obtain a Virtual Asset Service Provider (VASP) license.
Despite the worsening crypto regulatory environment, two derivative metrics indicate that the bulls are not yet throwing in the towel. However, they are likely to find it difficult to break out of the bearish price formation to the upside.
Derivatives Show Balanced Demand for BTC and ETH Leverage
Perpetual contracts, also known as reverse swaps, have a built-in fee that is typically charged every eight hours.
A positive funding rate indicates that long buyers require more leverage. Still, the opposite situation occurs when short sellers require additional leverage, causing the funding rate to turn negative.
The seven-day funding rate for BTC and ETH is neutral, indicating balanced demand for leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts.
BNB was the only exception, with traders paying up to 1% per week for short bets, which may be explained by the added risks following regulatory scrutiny on the Binance exchange.
Tether FUD hurts USDT premium
The binding (USDT) premium is a good indicator of demand for China-based retail cryptocurrency merchants. Measures the difference between China-based peer-to-peer transactions and the US dollar.
Excessive buying demand tends to push the indicator above 100% fair value, and during bear markets, Tether's market supply is flooded, causing a discount of 2% or more.
Tether's premium in Asian markets fell to 99.2% after lying flat since June 6, indicating moderate discomfort. June 16 reports on Exposure of Tether reserves to Chinese debt markets could have been the cause.
Potential Market Triggers
Derivatives metrics showed resilience considering the strong regulatory activity targeting cryptocurrency exchanges. Consequently, the bears have yet to prove their strength if they intend to push cryptocurrencies below the $1 trillion mark.
Related: 3 key Ether price metrics point to rising resistance at the $1,750 level
Despite the most recent bounce from support, any gains above $1.12 trillion in capitalization (10% higher than the low of $1.02 trillion) will likely be short-lived in the coming months.
Therefore, with Bitcoin halve Still over 300 days away, the bulls are currently pinning their hopes on a Bitcoin ETF Approval and/or a Federal Reserve rate cut as potential bull market catalysts.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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