Upside capped at $980B total crypto market, according to derivatives metrics

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A descending channel has been limiting crypto upside since late July, and noshitcoins explains how derivatives signal further downtrend.

Still, a single week of negative performance is not enough to interpret how professional traders are positioned. Those interested in tracking whales and market markers should analyze derivatives markets.For instance, perpetual futures, 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 demand more leverage. However, the opposite situation occurs when shorts require additional leverage, causing the funding rate to turn negative.Perpetual contracts reflected neutral sentiment as the accumulated funding rate was relatively flat in most cases over the past seven days. The only exception was Ether Classic , although a 0.50% weekly cost to maintain a short position should not be deemed relevant.

Since Sept. 26, the yields on the U.S. Treasury's 5-year notes declined from 4.2% to 3.83%, indicating investors are demanding fewer returns to hold extremely safe assets. The flight-to-quality movement shows how risk-averse traders are as mixed sentiment emerges from lackluster economic indicators and corporate earnings.

For this reason, bears believe that the prevailing longer-term descending formation will continue in the upcoming weeks. In addition, professional traders' lack of interest in leveraging cryptocurrency longs is evident in the neutral futures funding rate. Consequently, the current $980 billion market capitalization resistance should remain strong.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

 

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