Crypto market momentum stalls as traders await the results of recent regulatory actions

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The crypto market has been trading inside an unusually tight 5% range since March 17 as opposing forces continue to put pressure on the sector. As a result, over the past seven days, the total market capitalization he has increased by 3.8%. This was largely due to a 3.6% price increase in Bitcoin (BTC) and a 5% increase in Ether (ETH).

On March 27, the Commodity Futures Trading Commission sued Binance and Changpeng “CZ” Zhao for violating trading and derivatives rules and increasing regulatory uncertainty. According to the lawsuit, Binance provided access to leverage to customers trading on the spot and futures markets.

The announcement comes just five days after Coinbase received a Wells Notice from the U.S. Securities and Exchange Commission (SEC). This could cover exchange staking programs, listed digital assets, wallets and the Coinbase Prime service.

Japan’s Financial Services Agency (FSA) announced on March 31 that several foreign cryptocurrency exchanges, including Binance, Bybit, MEXC Global, and Bitget, were operating in Japan without proper registration, in violation of national laws. Similar behavior occurred outside the United States after announcing that it was open for business.

The left-right splitting trend that began in mid-March has repeatedly tested the crypto market’s $1.14 trillion market cap support. The move suggests investors are hesitant to make new bets until the details of the lawsuits against Binance and Coinbase are revealed.

Risk markets benefit from inflationary pressures

The global banking crisis forced the Federal Reserve to use two different emergency lending programs. As a result, the Swiss National Bank provided over $100 billion in liquidity to absorb the impact of Credit Suisse and its subsequent sale to UBS. Stocks and commodities are benefiting as traditional financial investors look for alternatives to protect against inflation.

Stocks and commodities are benefiting as traditional financial investors look for alternatives to protect against inflation. Since March 15, the S&P 500 index is up his 6.6%, gold is up his 4.6% and oil prices are up 18.6%. As a result, there is a compelling argument for both an uptrend and a downtrend within the lateral channel where he currently caps total cryptocurrency capital at $1.2 trillion.

Derivatives show mixed trends but do not use excessive leverage

Perpetual contracts, also known as inverse swaps, have built-in rates that are typically billed every 8 hours. Exchanges use this fee to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when the short (seller) requires additional leverage, resulting in a negative funding rate.

Bitcoin and Ether 7-day funding rates are neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts.

Traders can measure market sentiment by measuring whether more activity is taking place via call (buy) or put (sell) options. Generally speaking, call options are used for bullish strategies and put options are used for bearish strategies.

A put-to-call ratio of 0.70 indicates that open interest in put options is lagging behind more bullish calls and is therefore bullish. In contrast, the 1.40 indicator favors put options, which can be considered bearish.

The Bitcoin options put-to-call ratio rose to its highest level since March 9, indicating excessive demand for neutral-to-bearish puts. This is the opposite of what happened on his April 1st, when call options were in high demand.

Related: Debunking the hype: Are US-based crypto companies really “strangled”?

Traders underestimate chances of breaking $1.2 trillion

The market is overestimating the likelihood that the derivatives market will fall. However, given the balanced demand in the futures market, traders are hesitant to place additional bets until more clarity on regulator action. Whether it will break through is unknown, but professional traders are not betting on it right now.

From a derivatives market perspective, traders are overestimating the potential for a downside. But given the balanced demand in the futures market, investors are leery of making further bets until more clarity on regulator action.

Uncertainty exists as to whether the market cap can cross the $1.2 trillion barrier, but professional traders are currently not betting on this outcome.