The total market capitalization of cryptocurrencies shows strength even after the Merge and Federal Reserve rates hike

Cryptocurrencies have been in a bearish trend since mid-August after they failed to break out of the market cap resistance of $ 1.2 trillion. Even with the current downtrend and a brutal 25% correction, it wasn’t enough to break the three-month uptrend.

The aggregate capitalization of the cryptocurrency markets fell 7.2% to $ 920 billion in the seven days leading up to September. 21. Investors wanted to play it safe before the Federal Open Markets Committee meeting, which decided to raise the interest rate by 0.75%.

Total cryptocurrency market cap, billions of dollars. Source: TradingView

By raising the cost of borrowing cash, the monetary authority aims to curb inflationary pressure while increasing the burden on consumer finance and corporate debt. This explains why investors have moved away from risk assets, including equity markets, foreign currencies, commodities and cryptocurrencies. For example, WTI oil prices fell 6.8% from September. 14 and the MSCI China stock market index fell 5.1%.

Ether (ETH) also saw a 17.3% retracement over the seven day period and many altcoins performed even worse. The merger of the Ethereum network and its subsequent impact on other GPU mineable coins caused some skewed results among the worst weekly results.

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

Chiliz (CHZ) gained 21.5% after the launch of two successful fan tokens by the MIBR esports team and the Brazilian soccer team VASCO.

XRP gained 16.6% after Ripple Labs asked a federal judge to immediately determine whether the company’s XRP token sales violated U.S. securities laws.

ApeCoin (APE) gained 15% as the community expects the launch of the staking program, which will be detailed by Horizen Labs on 7 September 22.

RavenCoin (RVN) and Ethereum Classic (ETC) retraced most of the previous week’s gains as investors realized that Ethereum miners’ hash rate gains did not necessarily convert into greater adoption.

Traders’ appetite has not waned despite the correction

The OKX Tether (USDT) premium is a good indicator of demand from China-based cryptocurrency retail traders. Measure the difference between China-based peer-to-peer exchanges and the US dollar.

Excessive buying demand tends to put pressure on the indicator above 100% fair value and, during bear markets, Tether’s market supply gets swamped, causing a discount of 4% or more.

Tether (USDT) peer-to-peer vs. USD / CNY. Source: OKX

The Tether premium currently stands at 100.7%, the highest level since June 15th. While still below the neutral area, the indicator has shown modest improvement over the past week. Considering that the cryptocurrency markets plummeted 7.2%, this data should be seen as a win.

Perpetual contracts, also known as reverse swaps, have a built-in fee that is usually charged every eight hours. Exchanges use this fee to avoid currency risk imbalances.

A positive funding rate indicates that longs (buyers) require greater leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to go negative.

Funding rate of perpetual futures accumulated as of September 21. Source: Coinglass

As illustrated above, the seven-day accumulated funding rate was negative for each altcoin. This data indicates excessive demand for shorts (sellers), although it could be rejected in the case of Ether because investors aiming for free fork coins during the merger likely bought ETH and sold futures contracts to hedge the position.

More importantly, Bitcoin’s funding rate remained slightly positive during a week of falling prices and potentially bearish news from the Fed. Now that this fundamental decision has been made, investors tend to avoid placing new bets until some new data provides insight into how the economy adapts.

Overall, the Tether premium and futures funding rate show no signs of stress, which is good considering the negative performance of the cryptocurrency markets.

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