Is the current market rally sustainable?

The crypto market has recovered slightly over the past week, but the funding rate for perpetual futures and the Tether premium reflect a lack of trader confidence.

Analysis of the crypto market performance over the past week may give investors the impression that the total market cap is up just 4% to $2.03 trillion, but most of that comes from the top 5 coins, including the 2 stablecoins with Bitcoin (BTC), Ether (ETH), Binance Coin (BNB) and stablecoins reflecting a 9.3% increase in market capitalization from $382 billion to $418 billion la.

This explains why so many of the top 80 altcoins are up 25% or more while very few have shown negative performance.

Performance of the top 80 altcoins | Source: nomics

Gala Games (GALA) announced on February 9th a partnership with world-renowned hip-hop star Snoop Dogg to launch a new album and exclusive NFT campaign. Gala Games also plans to support additional content such as access to movies, comics and more in the future.

Theta Network (THETA), a decentralized video sharing platform, is powered by Theta Labs Grant for Replay, a Web 3 content tracking and payment protocol for content owners. According to the press release, Replay’s end-to-end solution will allow Theta users to be fairly rewarded for their contributions.

XRP also surged after Ripple was granted “Fair Notice Protection” by the US Securities and Exchange Commission. The decision relates to the ongoing legal battle in which the SEC alleges that Ripple sold XRP as an illegal security.

The decentralized storage protocols Arweave (AR) and Dfinity (ICP) performed worst. Meanwhile, Cosmos (ATOM) has seen the Total Locked Value (TVL) in the CosmosHub smart contract fall 82% to $1.2 million.

Finally, Solana (SOL) continues to reflect the bearish sentiment directly related to the Feb. 2nd smart contract bridge attack on wormhole tokens. This is the biggest hack in 2022 so far. , with 120,000 ETH ($321 million value).

Tether premium reflects demand short by retail investors

The OKEx Tether (USDT) premium measures the difference between peer-to-peer (P2P) transactions in China and the US dollar. Excessive crypto retail demand tends to push the indicator above fair value or 100%. A bear market, on the other hand, is likely to overpopulate Tether supply, resulting in a discount of 4% or more.

Tether (USDT) peer to USD/CNY | Source: OKX

Currently the index is at 99.5% which is neutral but the spread has narrowed over the last 6 weeks. This signals that retail demand is picking up and is a positive result considering the overall crypto cap is still 35% below its all-time high of $3 trillion (ATH).

Futures markets confirm lack of “euphoria”

Perpetual contracts, also known as inverse swaps, have embedded rates that are typically calculated every 8 hours. Such measures are intended to avoid an imbalance in exchange rate risks.

A positive funding rate indicates that a long (buy) order requires more leverage. However, the opposite situation occurs when a short (sell) order requires more leverage and this causes the funding rate to become negative.

Funding rate 8 hours for perpetual futures on February 11th | Source: coin jar

As described above, the fare charged every 8 hours is zero or slightly negative in most cases. This data shows the demand for balanced leverage of long and short orders. When there is risk appetite on both sides, the rate is above 0.05% or 1% per week.

The perpetual futures contract is the preferred derivative of retail traders because its price tends to follow the regular spot market. The Tether premium and funding rate are neutral to bearish despite a 4% weekly gain, but there’s a factor that the cryptocurrency has recently suffered a 50% drop, meaning these indicators are somewhat volatile.

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