Crypto Market Soars to $1.55 Trillion, But Retail Enthusiasm Remains Muted Amid Economic Concerns
Summary:
On December 5, the total value of the cryptocurrency market exceeded $1.55 trillion, marking a notable increase with Bitcoin becoming the ninth-largest globally tradable asset. While the cryptocurrency market shows impressive gains, analysts note that retail interest remains relatively subdued due to credit and inflation concerns. Certain key indicators like wages and household net worth in the U.S. economy have touched all-time highs, but Bitcoin and Ether's gains might not have completely registered with retail traders. There has been a stable search pattern for Bitcoin and cryptocurrencies on Google Trends, but the current level is significantly lower than the 2021 peak. Also, the retail traders' participation remains indeterminate for this cycle, especially in the light of potential legal issues facing Binance.
On December 5, the total value of the cryptocurrency market shot past the $1.55 trillion mark, fueled by notable increases of 14.5% for Bitcoin (BTC) and 11% for Ether (ETH) within a week. This historic high, the best in a span of 19 months, propelled Bitcoin to become the ninth-largest asset globally, surpassing Meta's capitalization, which stands at $814 billion.
While the bull market continues, experts denote that retail demand remains comparatively dormant. Some believe this is an aftermath of an inflation-riddled environment and the decreasing appeal of credit, with interest rates persisting above 5.25%.
Retail investors seem to overlook Bitcoin because they're more concerned about managing basic needs such as rent and food. Their focus, according to Rajat Soni, an analyst may shift towards Bitcoin around 2025, when they may feel compelled to invest out of fear of missing out.
On the other side, several indicators for US economics have skyrocketed to all-time highs, including wages, net household worth, and salaries. However, analyst Ed Yardeni questions whether the traditional Christmas trading surge has occurred early this year, considering the S&P 500 experienced an 8.9% boost in November. This increase can be linked to relieving inflation stress and the strengthening job market. Nevertheless, investors remain wary, keeping around $6 trillion in money market funds as backup.
Given there is no reliable method to track retail participation in the crypto market, it's crucial to use featured data sets that are more extensive than merely relying on Google Trends and app download rankings for crypto-related content. The USD Tether (USDT) premium status in China can provide a substantive measure of retail demand within the crypto market. It tells us the difference in USDT peer-to-peer trades based on Yuan and the worth of the US dollar.
As of December 5, the USDT premium compared to the yuan stood at 1%, showing a slight increase. This remains within a neutral range, however, it has not crossed the 2% barrier over the past six months. It is still a necessity for Chinese investors, who wish to convert cash into cryptocurrencies, regardless of their preferred choice between Bitcoin or altcoins.
Syncing with the USDT premium, Google Trends also shows a stable pattern in the past three weeks for the search terms "buy bitcoin" and "buy crypto". The current 90-day index stands around 50% with no recent improvement despite Bitcoin's 53% rise over the last 50 days while the S&P 500 increased 4.5%. Compared to the peak 2021 levels, the current search stands 90% lower.
Examining derivatives markets, specifically perpetual futures or inverse swaps, offers important insights. These contracts include a fixed rate that accrues every eight hours. A positive funding rate suggests buying demand for leverage, while a negative rate indicates sellers are leveraging more.
Currently, the participation of retail players remains indeterminate, with scarcity of new investors showing excessive positive sentiment. Analysts highlight the trend in the Coinbase app, but also remind us that Binance is under regulatory investigation with potential legal troubles facing its founder, Changpeng Zhao. Existing retail investors might have switched to Coinbase from offshore exchanges, rather than indicating an influx of new cryptocurrency enthusiasts.
Published At
12/6/2023 12:58:53 AM
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