Is the cryptocurrency market about to break its 10-week falling streak?

The total market capitalization of the cryptocurrency fell to $1.02 trillion on June 15, its lowest level in three months. But while the flexibility of the derivatives market and the weekend’s rise in prices amid uncertainty in stablecoin reserves offers hope for bulls, it may be too early to celebrate.

Crypto regulatory conditions worsen

The bearish trend has been observed in the last few weeks due to regulatory uncertainty. Last week, bitcoin (BTC) and BNB saw gains of 2.5%, but XRP declined by 5.2% and ether (ETH) recorded a 0.7% decline.

Note that the 10-week long pattern has tested the support level in several instances, indicating that bulls will find it difficult to break out of the bearish trend as regulatory conditions worsen around the world.

For starters, New York-based derivatives exchange Bakkt is delisting Solana (SOL), Polygon (MATIC) and Cardano (ADA) due to recent regulatory developments in the United States. The decision follows last week’s lawsuits brought by the Securities and Exchange Commission (SEC) against crypto exchanges Binance and Coinbase.

Connected: Why is the crypto market up today?

Most recently, on June 16th, Binance has been the subject of a preliminary investigation in France since February 2022. The France-based branch of the crypto exchange reportedly failed to obtain an operating license and illegally provided its services to French customers. Furthermore, according to regulators, the exchange lacked know-your-customer procedures.

Also on June 16, Binance announced its departure from the Netherlands, asking users to withdraw their funds as soon as possible. The decision to exit the Dutch market came after the exchange failed to obtain a Virtual Asset Service Provider (VASP) license.

Despite the worsening crypto regulatory environment, two derivatives metrics indicate that bulls are not throwing in the towel just yet. Nevertheless, they will find it difficult to break the bearish price formation to the upside.

Derivatives Show Balanced Demand For BTC, ETH Leverage

Perpetual contracts, also known as inverse swaps, have an embedded rate that is typically charged every eight hours.

A positive funding rate indicates that the longs (buyers) demand more leverage. Yet, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to become negative.

The seven-day funding rate for BTC and ETH is neutral, indicating balanced demand from leveraged longs (buyers) and shorts (sellers) using perpetual futures contracts.

BNB was the only exception, with traders paying up to 1% per week for small stakes, which can be explained by the added risks following regulatory scrutiny on the Binance exchange.

Tether FUD Hurts USDT Premium

The Tether (USDT) premium is a good gauge of China-based crypto retail trader demand. It measures the difference between China-based peer-to-peer trades and the United States dollar.

Excessive buying demand pressures the index above fair value at 100%, and during bearish markets, Tether floods the market offering, leading to a discount of 2% or more.

After remaining flat since June 6, Tether premiums in Asian markets fell by 99.2%, indicating moderate volatility. A June 16 report on the risk of Tether reserves in Chinese debt markets may be the reason.

potential market triggers

Derivative metrics displayed resilience given the strong regulatory activity aimed at crypto exchanges. As a result, the bears are yet to prove their might if they intend to push the crypto below the $1 trillion mark.

Related: 3 Key Ether Price Metrics Pointing to Rising Resistance at the $1,750 Level

Despite the most recent bounce off support, any gains above $1.12 trillion in capitalization (up 10% from $1.02 trillion low) are likely to be short-lived over the next few months.

Therefore, with bitcoin still more than 300 days away, bulls are currently pinning their hopes on a bitcoin ETF approval and/or a Federal Reserve rate cut as a potential bull market catalyst.