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Crypto Market Reaches a Three-Month Low Amid Regulatory Uncertainty
Doubts about regulatory matters and the transparency issues surrounding stablecoins have resulted in the cryptocurrency markets hitting a three-month low.
On June 15, the total market capitalization for cryptocurrency plummeted to $1.02 trillion, marking its lowest point in three months. Despite the resilience displayed by the derivatives market and a late-week price uptick amidst stablecoin reserve uncertainties, bulls may need to temper their celebrations.
Regulatory Conditions for Crypto Worsen
A negative trend prompted by regulatory uncertainty has dominated recent weeks. Last week saw Bitcoin and BNB registering modest gains of 2.5%, however, XRP fell by 5.2% and Ether traded down by 0.7%.
This 10-week trend has repeatedly challenged the support level, suggesting that bulls could struggle to break away from the bearish trend as regulatory conditions continue to deteriorate worldwide.
The New York-based derivatives exchange, Bakkt, has taken the step of delisting Solana, Polygon, and Cardano, citing recent US regulatory changes. This move follows hot on the heels of last week's SEC lawsuits against crypto exchanges Binance and Coinbase.
On June 16, it emerged that Binance has been under preliminary investigation in France since February 2022. The French arm of the crypto exchange is accused of operating without a license and illegally offering services to French customers, in addition to lacking appropriate Know Your Customer procedures.
On the same day, Binance announced its withdrawal from the Netherlands, urging users to withdraw funds as soon as possible. This decision came after the exchange was unable to secure a virtual asset service provider license.
Derivatives Indicate Bullish Persistence Amid Regulatory Challenges
Despite the deteriorating regulatory climate, two derivatives metrics suggest that the bulls are not ready to capitulate. However, overturning the bearish price trend will still be an uphill battle.
BTC, ETH Leverage Demand Balanced in Derivatives
Perpetual contracts, also known as inverse swaps, incorporate a rate that is typically charged every eight hours.
A positive funding rate signifies a higher demand for leverage from longs (buyers), whereas a negative rate indicates increased demand from shorts (sellers).
The seven-day funding rate for BTC and ETH is currently neutral, suggesting an equal demand from leveraged longs and shorts utilizing perpetual futures contracts.
BNB stood out as an exception, with traders shelling out as much as 1% per week for short bets, likely due to the heightened risks following increased regulatory scrutiny of the Binance exchange.
USDT Premium Impacted by Tether Uncertainty
The Tether premium serves as a useful measure of demand from China-based crypto retail traders. It calculates the discrepancy between China-based peer-to-peer trades and the US dollar.
High buying demand typically forces the indicator above its fair value at 100%, and during bearish markets, Tether's market offer becomes saturated, leading to a discount of 2% or more.
The Tether premium in Asian markets dropped to 99.2% after remaining stagnant since June 6, indicating a moderate level of unease. This may have been caused by June 16 reports concerning Tether reserves' exposure to Chinese debt markets.
Market Catalysts on the Horizon
Despite intense regulatory pressure on crypto exchanges, derivatives metrics have shown resilience. Therefore, bears need to demonstrate their might if they aim to push crypto below the $1 trillion threshold.
Even with a recent bounce from the support level, any increase above $1.12 trillion in market cap (a 10% rise from the $1.02 trillion low) is likely to be ephemeral over the ensuing months.
With more than 300 days remaining until the next Bitcoin halving, bulls are placing their faith in potential market triggers such as the approval of a Bitcoin ETF and/or a Federal Reserve rate cut.
