The total cryptocurrency market cap has fallen by 1.5% in the past seven days to settle at $840 billion. The slight negative move did not break the upward channel that started on November 12, although the overall sentiment remains bearish and the year-to-date losses are at 64%.

Total cryptocurrency market capitalization in USD, 12-hour period. Source: TradingView
bitcoin
BTC

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$16,403

The price fell by 0.8% over the course of the week, holding near the $16,800 level at 10:00 UTC on December 8 – although it eventually crossed $17,200 later in the day. Discussions regarding the regulation of cryptocurrency markets have put pressure on the markets, and the collapse of the FTX exchange has curbed the appetite of traders, prompting lawmakers to turn their attention to the potential impact on financial institutions and the lack of protection for retail investors.

On December 6, the Financial Crimes Enforcement Network (FinCEN) said it was “carefully looking” into decentralized finance (DeFi), with the agency’s acting director, Himamauli Das, saying that the digital asset and digital currency ecosystem is a “key priority area.” In particular, the regulator was interested in “the potential for DeFi to reduce or eliminate the role of financial intermediaries” that are critical to its efforts against money laundering and terrorist financing.

The Legislative Council of Hong Kong has approved a new licensing regime for virtual asset service providers. From June 2023, cryptocurrency exchanges will be subject to the same legislation as traditional financial institutions. The change will require stricter anti-money laundering and investor protection measures before a license to operate is guaranteed.

Meanwhile, Australian financial regulators are actively working on ways to integrate payment stablecoins into the regulatory framework for the financial sector. On December 8, the Reserve Bank of Australia published a report on stablecoins that cited risks of turmoil in financing markets, such as bank exposure and liquidity. The analysis highlighted the particular vulnerability of algorithmic stablecoins, pointing to the collapse of the Terra-Luna ecosystem.

The weekly decline of 1.5% in the total market capitalization was mainly affected by the capitalization of Ether
ETH

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$1,161

3% negative price move and BNB
BNB

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$240

which was trading down 2.5%. However, the downtrend has taken a heavy toll on altcoins, with 10 of the top 80 altcoins dropping 8% or more in the period.

Weekly winners and losers among the top 80 coins. Source: Nomex
Trust Wallet (TWT) gained 18.6% as the service provider gained market share from launching its browser extension wallet in mid-November.

Axi Infinity Chards
AXS

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$6.51

It rose 17.6% as investors revised their expectations after a dramatic 89% correction since the first quarter of 2022.

link chain
Link

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$5.75

It saw a correction of 10.1% after the staking program opened for early access on December 6, indicating that investors were anticipating the event.

1INCH stock fell 15.2% after opening a 15% offering on Dec. 1 under the original four-year vesting schedule.

The demand for leverage is balanced between bulls and bears
Perpetual contracts, also known as reverse swaps, have a built-in rate that is usually charged every eight hours. Exchanges use these fees to avoid imbalances in exchange risk.

A positive funding ratio indicates that long contracts (buyers) require more leverage. However, the opposite situation occurs when short positions (sellers) require additional leverage, causing the financing rate to turn negative.

Perpetual futures contracts accumulated at a 7-day funding rate on December 8. Source: Coinglass
The seven-day funding rate was close to zero for Bitcoin and altcoins, which means that the data indicates that there is a balanced demand between leveraged longs (buyers) and shorts (sellers) in this period.

Traders should also analyze the options markets to understand whether whale and arbitrage desks are placing higher bets on bullish or bearish strategies.

The put/call options ratio reflects a moderate bullish trend
Traders can gauge overall market sentiment by gauging whether more activity is going through with buying (going long) or selling (selling) options. In general, call options are used for bullish strategies, while call options are used for bearish strategies.

A ratio of 0.70 to long indicates that the open interest of the put options lags the bullish call increase by 30% and is therefore bullish. In contrast, the indicator 1.40 favors put options by 40%, which can be considered bearish.

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