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The total crypto market cap is at risk of falling below $825 billion, but data shows traders actively adding to their longs and shorts.
The total cryptocurrency market capitalization dropped 8.1% in the past two days after failing to break the $880 billion resistance on Dec. 14.
The rejection did not invalidate the 4-week-long ascending channel, but a weekly close below $825 billion will confirm a shift to the lower band and reduce the support level to $790 billion.
The overall investor sentiment toward the market remains bearish, and year-to-date losses amount to 66%. Despite this, Bitcoin (BTC) price dropped a mere 2% on the week, down to the $16,800 level at 17:00 UTC on Dec. 16.
A far different scenario emerged for altcoins which are being pressured by pending regulation and fears that major exchanges and miners could be insolvent . This explains why the total market capitalization had dropped by 4.7% since Dec. 9.
According to court documents filed on Dec. 15, a United States Trustee announced the committee responsible for part of FTX's bankruptcy proceedings. Among those is Wintermute Asia, a leading market maker and GGC International, an affiliate of the troubled lending platform Genesis. Investors remain in the dark about who the biggest creditors from the failed FTX exchange group are and this is fueling speculation that contagion could continue to spread.
On Dec. 15, The central bank of the Netherlands issued a warning to investors using KuCoin, saying the exchange was operating without legal registration. De Nederlandsche Bank added that the crypto firm was "illegally offering services" and "illegally offering custodian wallets" for users.
Adding to the drama, on Dec. 16, Mazars Group, a company known for its proof-of-reserve audit services for crypto companies, reportedly removed recent documents that detail exchange audits from its website. The firm was previously appointed as an official auditor for Binance's proof-of-reserve updates, a movement that was followed by Kucoin and Crypto.com.
The Bitcoin mining sector has also suffered due to the strong correction in cryptocurrency prices and rising energy costs. Publicly-listed miner Core Scientific was offered a $72 million contingent emergency credit line to avoid bankruptcy. The financial lender requires suspension of all payments to Core Scientific's equipment lenders while Bitcoin remains below $18,500.
The 4.7% weekly drop in total market capitalization was impacted mainly by Ether's (ETH) 5.4% negative price move and BNB, which traded down 15.1%. Consequently, the bearish sentiment significantly impacted altcoins, with 14 of the top 80 coins dropping 12% or more in the period.
The Open Network (TON) gained 30% after Telegram launched bidding for anonymous phone numbers sold for TON tokens.
Bitcoin SV (BSV) rallied 11.7% after Craig Wright, the self-proclaimed Satoshi Nakamoto and leader of the altcoin project, appealed to his loss in Norway courts.
Trust Wallet (TWT) saw a 27.2% correction after its parent company (Binance) faced $1.9 billion in withdrawals in 24 hours.
Currently, data shows demand for leverage is split between bulls and bears.
Perpetual contracts, also known as inverse swaps, have an embedded rate usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.
A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.
The 7-day funding rate was near zero for Bitcoin and altcoins, meaning the data points to a balanced demand between leverage longs (buyers) and shorts (sellers) in the period.
Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed higher bets on bullish or bearish strategies.
Traders can gauge the market's overall sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.
A 0.70 put-to-call ratio indicates that put options open interest lag the more bullish calls by 30% and this is bullish. In contrast, a 1.40 indicator favors put options by 40%, which can be deemed bearish.
Even though Bitcoin's price failed to break the $18,000 resistance on Dec. 14, there was no excessive demand for downside protection using options. More precisely, the indicator has been below 1.00, so slightly optimistic, since Dec. 12.
Presently, the put-to-call volume ratio stands near 0.88 because the options market is more strongly populated by neutral-to-bullish strategies which favors call (buy) options by 12%.
Despite the substantial weekly price decline in a handful of altcoins and the 4.7% drop in total market capitalization, derivatives metrics reflect no signs of panic.
There has been a balanced demand for longs and shorts using futures contracts. As a result, the BTC options risk assessment metric remains favorable even after Bitcoin's 8.5% correction following the $18,370 high on Dec. 14.
Ultimately, bulls should not expect the $825 billion market capitalization to hold, which does not necessarily mean an immediate retest of the $790 billion support.
Currently, the lower band of the ascending channel continues to exert upward pressure, but the newsflow looks favorable for bears.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
"This may increase the risk of customers becoming involved in money laundering or terrorist financing," said De Nederlandsche Bank.
The central bank of the Netherlands, De Nederlandsche Bank, has issued a warning to investors in KuCoin, saying the exchange was operating without legal registration.
In a Dec. 15 announcement, the central bank said MEK Global Limited, or MGL, which does business in the Netherlands as KuCoin, was not in compliance with the country’s anti-money laundering, or AML, and the equivalent of combatting the financing of terrorism, or CFT, regulations. De Nederlandsche Bank added the crypto firm was “illegally offering services” as well as “illegally offering custodian wallets” for users.
“Customers of MGL are not in violation,” said the bank. “However, this may increase the risk of customers becoming involved in money laundering or terrorist financing.”
DNB warns against MEK Global Limited, doing business as KuCoinhttps://t.co/kgh6XVkYbI
— De Nederlandsche Bank (@DNB_NL) December 15, 2022
First launched in 2017, KuCoin is headquartered in Seychelles and operates in most countries around the world. As a major crypto exchange, KuCoin has been the subject of scrutiny by regulators and lawmakers amid the crypto market downturn and the collapse of FTX. CEO Johnny Lyu dismissed rumors of insolvency at the exchange in July, and the firm provides proof of reserves data for users.
Related: Coinbase enters the Netherlands with central bank approval
In 2021, De Nederlandsche Bank made similar allegations of illegal operations for Binance Holdings Limited and the risk of violating AML and CFT regulations. The Binance company later paid an “administrative fine” of more than 3 million euros due to the violations.
Cointelegraph reached out to KuCoin for comment, but did not receive a response at the time of publication.
Mazars, the former accounting firm for Donald Trump’s companies, was hired recently to audit Binance’s PoR.
Crypto exchange KuCoin hired the international accounting firm Mazars for a third-party audit of its proof of reserves (PoR).
According to an announcement on Dec. 5, the verification will provide the exchange customers additional transparency and reporting on whether their in-scope assets are collateralized, along with details on main, trade, margin, robot and contract accounts for Bitcoin (BTC) and Ether (ETH), as well as for the stablecoins Tether (USDT) and USD Coin (USDC).
The report should be available on KuCoin’s official website within a few weeks. CEO of KuCoin Johnny Lyu said the move is the next step in the exchange efforts to provide transparency on users’ funds. Wiehann Olivier, partner at Kucoin, also noted:
“After recent events, there is a dire need in the industry for additional transparency, and we are confident that Mazars’ PoR service offering to KuCoin and other international cryptocurrency exchanges will aid in building trust through transparency.”
As reported by Cointelegraph, Mazars was also appointed as an official auditor to conduct “third party financial verification” in Binance’s PoR on Nov. 30. Binance’s publicly shared Bitcoin information is already being reviewed.
Related: Will Grayscale be the next FTX?
Headquartered in Paris, the international accounting firm previously worked for former United States President Donald Trump’s company. According to reports, the firm cut ties with Trump and his family in 2022.
KuCoin and Binance are among the six crypto firms requested to provide information on consumer protection by the United States Senator Ron Wyden by Dec. 12.
Wyden requested Binance, Coinbase, Bitfinex, Gemini, Kraken and KuCoin information on subsidiary companies, safeguards of consumer assets, use of customer data, and guards against market manipulation. The senator argued that crypto users with funds in FTX had “no such protections” as those offered by banks or registered brokers under the Federal Deposit Insurance Corporation or Securities Investor Protection Corporation.