Bulls took a breather in the past 24 hours as risk-off sentiment spread across global markets, boosting Bitcoin. again towards $88,000.
Although the Federal Reserve’s decision to keep interest rates steady between 3.5% and 3.75% was widely expected, rising geopolitical tensions and a rotation toward safe-haven assets left cryptocurrency traders facing a sea of red.
Major US stock indexes saw a mix of optimism and pullback in response, with the S&P 500 briefly surpassing 7,000 points for the first time before retreating. Those indexes are being heavily influenced by this week’s earnings reports from the largest companies.
But in the case of cryptocurrencies, the risk aversion sentiment was greatly affected. Bitcoin fell and the broader CoinDesk 20 index (CD20) lost 2.9%.
That exodus from cryptocurrencies caused gold to jump to all-time highs above $5,500 an ounce, dragging down gold-backed tokens like rising amid an aggressive accumulation of the metal by Tether itself and central banks. Silver also extended its gains to trade at $117 an ounce.
Bitcoin, and the crypto market in general, has continued to operate more as a liquidity-sensitive risk asset than a reliable hedge, given its increased liquidity for investors looking to exit the sector. The US Dollar Index (DXY) fell to its lowest level in four years this week, but investors do not see that drop as a structural change.
Derivatives positioning
- The accumulated notional open interest in all crypto futures has fallen almost 3% to $132.26 billion, indicating growing risk aversion.
- Crypto futures bets worth $348.30 million have been settled, marking a 13% increase in the account in 24 hours. Most of these are bullish long plays.
- Despite the decline in bitcoin and ether prices following the Fed’s decision, their 30-day implied volatility indices remain stuck near multi-month lows. This shows that traders continue to expect calmer overall market conditions rather than panic.
- Open interest in HYPE-linked futures fell more than 12%, leading to capital outflows from major tokens including bitcoin, ether, solana, and XRP.
- Annualized perpetual funding rates for the largest cryptocurrencies are just above zero now, unlike the 10% we saw earlier this week that signaled real bullish momentum. Funding rates for XLM have turned decisively negative in a sign of traders’ predisposition towards bearish or short bets.
- In the options market listed on Deribit, the environment remains cautious, with BTC and ETH call options still commanding a premium to call options. The selling bias is relatively stronger in ether.
- Block flows (large trades executed outside of public order books), featured BTC buy spreads and ETH sell calendar spreads, both strategies intended to benefit from low volatility and falling theta (time).
symbolic talk
- The Optimism community approved a 12-month plan to buy back OP tokens using the revenue generated by its Ethereum layer 2 chain network.
- More than 84% of participating votes supported the measure, which reached a quorum just before the deadline. If a final Joint House vote on the protocol reaches a 60% majority, the Optimism Foundation will begin converting ETH earned from sequencer fees into OP starting in February.
- Half of Superchain’s revenue, estimated at more than $17 million last year, would go toward monthly token purchases. The Superchain includes chains like Coinbase’s Base and World Chain.
- Some critics argued that combining buybacks with token issues nullified any value returned to holders. The foundation responded, saying that the buyback would help align the OP token with network growth while preserving funds for ecosystem development.
- OP’s price is down 80% over the past year and is now trading below 29 cents, having fallen an additional 5% in the last 24 hours.
