The cryptocurrency market is tired after Tuesday’s relentless waves of selling pressure. Several assets have already stabilized as they begin to establish support levels, although if the US dollar continues to show strength it could indicate a period of prolonged decline.
bitcoin was up around 1% as of midnight UTC after two days of declines that saw it fall to the lowest price since June at one point. Ether which fell up to 20% in 48 hours (the steepest drop in three months), added 2%.
While the CoinDesk 20 index, a measure of the largest cryptocurrencies, is 2.5% lower in 24 hours, that largely reflects yesterday’s action: it is up 2.2% since midnight UTC and only one component, is minor.
The altcoin market is in worse shape than bitcoin, which continues to hold on to the $99,000 support level.
Several tokens have now completely pulled back since July, suggesting that a brief “altcoin season” has concluded with the focus returning to BTC and whether it can weather this recent storm.
Derivatives positioning
By Saksham Diwan
- The BTC futures market reflects growing caution. Open interest (OI) has decreased to $25.3 billion from $26 billion last week, suggesting traders are reducing leverage. Compared to BTC’s higher year-over-year price, the drop indicates that the relative amount of leverage in the market has not kept pace with asset appreciation.
- The three-month annualized basis declines to 3%-4%, indicating that the basis trading is not attractive currently. Funding rates are mixed but low across major venues (4%-9% annualized), reinforcing the lack of strong commitment to trends and overall market caution on the futures side.
- The bitcoin options market is showing mixed but volatile signals.
- Implied volatility (IV) is high at all maturities, pointing to high expectations of short-term movement. Structurally, the IV term structure shows a short-term retracement (downward slope) before resuming a long-term contango (upward slope).
- Despite this volatility, the recent trading bias has once again been bullish, with 24-hour puts volume tilting between 58% and 42% in favor of calls, indicating an active upside preference.
- The recent price drop was heavily influenced by leveraged liquidations, with $1.7 billion in liquidations in the last 24 hours split between 76% and 24% in favor of long positions. ETH led the notional losses with $572 million liquidated.
- Crucially, the long-term average liquidation volume over the last two days of $1 billion is significantly higher than the seven-day average of $620 million, confirming the amplified impact of forced selling on the current price action.
- Looking ahead, a rebound may face immediate resistance, with a key price level of $102,500 with $124 million in potential liquidations.
symbolic talk
By Oliver Knight
- The altcoin market remains in oversold territory following Tuesday’s grueling sell-off that saw several tokens fall to their lowest levels in months.
- The average crypto Relative Strength Index (RSI) is 38/100, with tokens including OKB, SKY, and FLR printing figures as low as 23/100. This suggests that while the overall crypto market is tilting lower, a short-term relief rally is possible.
- Any bounce suggestion would be invalidated if bitcoin and ether break below their respective support levels at $99,000 and $3,100.
- If further declines were to occur in BTC and ETH, altcoins would fare worse due to lack of liquidity and skewed leverage levels. This means that altcoin order books simply do not have enough buy orders to absorb the selling pressure and subsequent liquidations, resulting in dramatic spikes to the downside.
- Traders will be wondering if the recent “altcoin season” has officially ended with most tokens, with the exception of privacy coins, eroding their July and August rallies.
- The privacy coin narrative remains a key driver in the current market, while DCR and ZEC cooled off on Wednesday, XMR rose 7% and the entire sector remained significantly higher over the past month.
