Weekly Updates: Crypto Markets Bounced and Sentiment Improved, but Recovery Depends on Federal Reserve

An ascending triangle formation has driven the total crypto market capital towards $1.2 trillion. However, the problem with this seven-week-long setup is the diminishing volatility, which could last until the end of the month. From there, the pattern can break either upwards or downwards, but Tether and futures markets data show that bulls are lacking enough conviction to catalyze an upside break.

Total crypto market cap (USD billion). Source: TradingView

Sentiment improves to neutral after 4 months

The risk-off attitude caused by rising interest rates has instilled a bearish sentiment into crypto investors since mid-April. As a result, traders have been unwilling to invest in volatile assets and have sought refuge in U.S. Treasuries, even though their returns do not compensate for inflation.

Crypto Fear & Greed Index. Source: alternative.me

The Fear and Greed Index hit 6/100 on June 19, near the lowest ever reading for this data-driven sentiment gauge since it began being measured in 2018. However, investors moved away from the “extreme fear” reading this week as the indicator maintained a 30/100 level. On August 11th, the Index finally entered a “neutral” area after a four-month-long bearish trend.

Below are the winners and losers from the past week, as the total crypto capitalization rose 2.8% to $1.13 trillion. While Bitcoin (BTC) posted a meager 2% gain, a handful of mid-capitalization altcoins jumped 13% or more in the period.

Weekly winners and losers among the top 80 coins. Source: Nomics

Celsius (CEL) jumped 97.6% after Reuters reported that Ripple Labs displayed interest in acquiring its parent, Celsius Network, and its assets seem to currently be filed under bankruptcy.

Chainlink (LINK) rallied 17% after announcing on August 8th that it would not support the upcoming Ethereum proof-of-work (PoW) forks that will occur during the Merge.

Avalanche (AVAX) gained 14.6%, having been listed for trading on Robinhood on August 8th.

Curve DAO (CRV) fell by 6% after the nameserver for the Curve.Fi website was hacked on Aug 9. The team quickly addressed the problem, but the front-end hack caused some of its users around $570 million in losses.

Further Recovery Will Depend on the Federal Reserve

Going by trading and derivative indicators, investors are less inclined to increase their positions at current levels, as shown by the Tether discount in Asia and the absence of a positive funding rate in the future markets right now.

These neutral-to-bearish market indicators are worrying, given that crypto’s total market capitalization has been in a seven-week uptrend. Investors’ distress over the Chinese property markets and further FED tightening movements is the most feasible explanation for the long-term market sentiment.

In short, investors are anxiously waiting for the Federal Reserve and Central Banks globally to signal that the policy of tightening is coming to an end. This is because expansionary policies are more favorable for scarce assets, including cryptocurrencies.

For now, the chances of the ascending triangle breaking above the projected $1.25 trillion mark seem low, but further macroeconomic data in the future will determine the direction central banks might take.