The data shows traders are mildly optimistic even if the total crypto market cap falls below $800 billion

The cryptocurrency’s total market cap fell 5% between November 14 and November 21 to reach a whopping $795 billion. However, overall sentiment is far worse considering this valuation is the lowest since December 2020.

Total crypto market cap in USD, 4 hours. Source: TradingView

The price of bitcoin (Bitcoin) fell just 2.8% this week, but investors have little to celebrate as the current level of $16,100 represents a 66% year-to-date drop. Even if the Collapse of FTX and Alameda Research priced in, investor uncertainty is now centered on Grayscale funds, including the $10.5 billion Grayscale Bitcoin Trust.

Genesis Trading, part of the Digital Currency Group (DCG) conglomerate, Withdrawals stopped on November 16th. In its latest quarterly report, the crypto derivatives and credit trading company said it has $2.8 billion worth of active loans. Fund manager Grayscale is a subsidiary of DCG and Genesis acted as liquidity provider.

The 5% weekly drop in total market cap was mainly driven by Ethers (ETH) 8.5% negative price movement. Still, the bearish sentiment had a larger impact on altcoins, with nine of the top 80 coins losing 12% or more over the period.

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

Litecoin (LTC) gained 5.6% after addresses at rest on the network surpassed 60 million coins for a year.

Near the log NEAR (VICINITY) fell 23% on concerns over the 17 million tokens owned by FTX and Alameda that backed Near Foundation in March 2022.

MANA by Decentraland (MANA) lost 15% and Ethereum Classic (ETC) another 13.5% as both projects had significant investment from Digital Currency Group, the controller of the ailing Genesis Trading.

Balanced leverage demand between bulls and bears

Perpetual contracts, also known as inverse swaps, have an embedded rate that is typically calculated every eight hours. Exchanges use this fee to avoid imbalances in exchange rate risk.

A positive funding rate indicates that longs (buyers) are demanding more leverage. However, the opposite situation occurs when short sellers (sellers) need additional leverage, making the funding rate negative.

Perpetual futures 7-day cumulative funding rate on November 21st. Source: Coinglass

The 7-day funding rate was slightly negative for Bitcoin, so the data points to excessive demand for shorts (sellers). Still, a 0.20% weekly cost of maintaining bearish positions is not worrying. Furthermore, the remaining altcoins – apart from Solana’s SOL (SOL) — presented mixed numbers, indicating balanced demand between longs (buyers) and shorts.

Traders should also analyze the options markets to understand whether whales and arbitrage desks have placed larger bets on bullish or bearish strategies.

The put/call ratio of the options shows a moderate upward movement

Traders can gauge overall market sentiment by measuring whether more activity is coming from call (buy) options or put (sell) options. In general, call options are used for bullish strategies while put options are used for bearish strategies.

A put-to-call ratio of 0.70 indicates that the open interest of the put options lags the more bullish calls by 30% and is therefore bullish. In contrast, an indicator of 1.20 favors put options by 20%, which can be considered bearish.

BTC options put to call ratio. Source: Laevitas

Although Bitcoin’s price fell below $16,000 on Nov. 20, investors did not rush to use options to protect themselves from downside risks. As a result, the put-to-call ratio remained steady near 0.54. Additionally, the bitcoin options market remains more populated by neutral to bearish strategies, as evidenced by current levels in favor of call options.

Derivatives data shows investor resilience considering there is no excessive demand for bearish bets according to futures funding rate and open interest from neutral to bullish options. Consequently, the odds are favorable for those betting that the $800 billion market cap support will show strength.