Crypto markets demonstrated fragility on Friday, with bitcoin trading closely above a psychological support level of $70,000.
The largest cryptocurrency surpassed this level on Wednesday, rising as high as $74,000 before failing to capitalize on an area of lower upper liquidity and retreating along with US stocks.
The escalation of war in the Middle East pushed oil to a new cycle high of $85 per barrel. Brent crude oil is up about 42% since the beginning of the year. Rising energy costs, coupled with growing uncertainty around Iran, have led traders to reassess the inflation outlook in Europe, with money markets now even pricing in the possibility of a European Central Bank rate hike by the end of the year, a sharp shift from expectations of rate cuts in 2025.
Higher interest rates would typically weigh on bitcoin and the broader crypto market, as investors shift toward safer assets that offer attractive returns without the volatility associated with risky assets.
The altcoin market has also shown signs of weakness over the past week according to Santiment’s social volume tracker, indicating that social media sentiment towards the speculative market is bottoming out.
Derivatives positioning
- The market is consolidating as bitcoin open interest (OI) rises to $16.16 billion from $15 billion last week, indicating a return to speculative interest.
- While retail funding remains stable in the 0% to 10% range, Binance has fallen to -2.5%, indicating a localized increase in short covering.
- The quarterly base remains at 2.7%, a sign that institutional conviction remains weak.
- The options market has shifted toward cautious optimism. The 24-hour call volume split has narrowed to 51/49 and the 25-week delta bias has cooled to 8% (from 15%), significantly reducing the cost of downside protection.
- While longer-term implied volatility (IV) remains stable near 50%, the short-term has spiked toward a sharp pullback, a sign that traders are pricing in an immediate, high-impact volatility event ahead of a return to medium-term growth.
- Coinglass data shows $257 million in 24-hour liquidations, with a 70-30 split between long and short positions. BTC ($121 million), ETH ($51 million), and others ($15 million) were the leaders in terms of notional settlements.
- The Binance settlement heatmap indicates $71,600 as the central settlement level to monitor, in case of a price surge.
symbolic talk
- Decentralized finance (DeFi) tokens MORPHO and JUP led Friday’s sell-off, losing 2% to 3% since midnight UTC as traders shifted from speculative tokens to dollars.
- OKX’s native OKB token gained the most in the past 24 hours, surging 23% after trading giant Intercontinental Exchange (ICE) signed a deal with the exchange to introduce tokenized stocks and crypto futures products.
- There were also substantial gains for KITE and RIVER, each of which rose around 15% in the last 24 hours to continue their impressive starts to the year.
- Privacy tokens continued to lose ground, with zcash (ZEC) and decred (DCR) falling 6% in the last 24 hours and the slowdown accelerating since midnight UTC.
