A bearish market structure has been pressuring cryptocurrencies\u2019 prices for the past six weeks, driving the total market capitalization to its lowest level in two months at $1.13 trillion. According to two derivative metrics, crypto bulls will have a hard time to break the downtrend, even though analyzing a shorter timeframe provides a neutral view with Bitcoin (BTC<\/a>), Ether (ETH<\/a>) and BNB<\/a>, on average, gaining 0.3% between May 12 and May 19.<\/p>\n Notice that the descending wedge formation initiated in mid-April could last until July, indicating that an eventual break to the upside would require an extra effort from the bulls. <\/p>\n Furthermore, there\u2019s the impending U.S. debt ceiling standoff<\/a>, as the U.S. Treasury is quickly running out of cash.<\/p>\n Even if the majority of investors believe that the Biden administration will be able to strike a deal before the effective default of its debt, no one can exclude the possibility of a government shutdown and subsequent default.<\/p>\n Not even gold, which used to be considered the world\u2019s safest asset class, has been immune to the recent correction, as the precious metal traded down from $2,050 on May 4 to the present $1,980 level.<\/p>\n Related:\u00a0Bitcoin, gold and the debt ceiling \u2014 Does something have to give?<\/a><\/em><\/strong><\/p>\n Circle, the company behind the USDC stablecoin<\/a>, has ditched $8.7 billion in Treasuries maturing in longer than 30 days for short-term bonds and collateralized loans at banking giants such as Goldman Sachs and Royal Bank of Canada.<\/p>\n According to Markets Insider, a Circle representative stated<\/a> that:<\/p>\n \u201cThe inclusion of these highly liquid assets also provides additional protection for the USDC reserve in the unlikely event of a U.S. debt default.\u201d<\/p><\/blockquote>\n The stablecoin DAI, managed by the decentralized organization MakerDAO, approved in March an increase to its portfolio holdings of the U.S. Treasuries<\/a> to $1.25 billion to \u201ctake advantage of the current yield environment and generate further revenue\u201d.<\/p>\n Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. <\/p>\n A positive funding rate indicates that longs (buyers) demand more leverage. Still, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.<\/p>\n The seven-day funding rate for BTC and ETH was neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts. Curiously, even Litecoin (LTC<\/a>) displayed no excessive long demand after a 14.5% weekly rally<\/a>.<\/p>\n To exclude externalities that might have solely impacted futures markets, traders can gauge the market\u2019s sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. <\/p>\n The expiration of options can add volatility to Bitcoin\u2019s price, which resulted in an $80-million advantage for bears<\/a> in the latest May 19 expiry. <\/p>\n A 0.70 put-to-call ratio indicates that put option open interest lags the more bullish calls and is, therefore, bullish. In contrast, a 1.40 indicator favors put options, which can be deemed bearish.<\/p>\n The put-to-call ratio for Bitcoin options volume has been below 1.0 for the past couple of weeks, indicating a higher preference for neutral-to-bullish call options. More importantly, even as Bitcoin briefly corrected down to $26,800 on May 12, there was no significant surge in demand<\/a> for the protective put options.<\/p>\n The options market shows whales and market makers unwilling to take protective puts even after Bitcoin crashed 8.3% between May 10 and May 12.<\/p>\n However, given the balanced demand on futures markets, traders seem hesitant to place additional bets until there\u2019s more clarity on the U.S. debt standoff. <\/p>\n Less than two weeks remain until June 1, when the U.S. Treasury Department has warned that the federal government could be unable to pay its debts.<\/p>\n![](\"https:\/\/s3.cointelegraph.com\/uploads\/2023-05\/7786a008-cb4d-4f39-9405-0c4e2c603b4a.png\")
Gold or stablecoins as a safe haven?<\/h2>\n
Derivatives markets show no signs of bearishness<\/h2>\n
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Glass half full, or investors prepping for the worst?<\/h2>\n