Market Wrap: Metaverse Tokens Rise; Crypto Analysts Expect More Volatility

Bitcoin (BTC) continued to trade sideways on Wednesday, indicating a pause in bearish sentiment among traders.

However, most alternative cryptos traded higher on Wednesday, paring losses from last week. For example, Decentraland's MANA token was up by 3% over the past 24 hours and is roughly flat over the past week. Meanwhile, The Sandbox's SAND token rose by 7% on Wednesday. MANA and SAND are metaverse tokens, used to exchange value in a virtual game setting.

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Also, on Wednesday, the U.S. Federal Reserve published minutes from its committee meeting of earlier this month, which indicated that multiple 50 basis point interest rate increases could occur over the next several meetings.

Stocks traded slightly higher, while gold and the 10-year Treasury bond yield ticked lower over the past 24 hours.

Range-bound price action typically results in a volatile breakout or breakdown.

The chart below shows the recent rise in open interest, or the number of outstanding contracts, in the bitcoin perpetual futures market. "Rapid surges in open interest tend to foreshadow large moves in the market," Arcane Research wrote in a report this week.

For example, a similar rise in open interest occurred shortly before a short squeeze in July of last year when BTC was trading around $30,000. But a rise in open interest also coincided with BTC's price peak of around $48,000 in March, and remained elevated during subsequent sell-offs in price, according to Arcane.

With so much uncertainty, traders have been unwilling to express a strong bullish or bearish bias. For example, funding rates, or the cost to fund long and short positions in the perpetual futures market, have been moved between neutral and negative over the past few months. That means traders holding short positions have been dominant in the market, willing to pay long traders to express a bearish view.

Still, funding rates have not been deeply negative in a while, which typically occurs around price bottoms. Likewise, extreme rises in funding rates have typically occurred around price peaks. That suggests the excess speculative activity that defined the 2020-2021 bull market has receded.

Most digital assets in the CoinDesk 20 ended the day higher.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.