Crypto Market Liquidation Accelerated Overnight With Bitcoin and ether falling another 2.7% and 3.5%, respectively, from midnight UTC to compound Thursday’s miserable session.
The drawdown comes with heavy losses for precious metals, with silver now trading at $96 after a 20% drop from Thursday’s all-time high of $121. Gold is trading back below $5,000 after falling 11% from Wednesday’s high of $5,600.
US stock index futures fell, while the dollar index (DXY) posted a 0.57% gain, boosted by expectations that Kevin Warsh appears set to become the new chairman of the Federal Reserve.
The global market crash, which saw bitcoin hit its lowest level since November, sparked $1.8 billion in sell-offs across crypto markets as leverage traders were caught off guard by the precipitous decline despite a weak start to the year for cryptocurrencies.
The bitcoin-dominant CoinDesk 20 (CD20) index is down 6.6% since the beginning of the year, while the altcoin-heavy CoinDesk 80 (CD80) has outperformed its counterpart and lost 2.28%.
Derivatives positioning
- The market swoon shook leveraged crypto futures bets worth $1.8 billion in 24 hours. This represents massive wealth destruction in addition to falling market capitalization. It usually takes time to regain investor confidence shaken by such losses.
- Open interest (OI) in futures tied to most major cryptocurrencies, including bitcoin and ether, has declined along with large liquidations. DOGE stands out with a 2% increase in OI, reflecting that traders shortened the decline. An increase in OI along with a drop in price is said to indicate this.
- Annualized perpetual funding rates for BTC, ETH, XRP and several other tokens have turned negative, a sign of growing demand for bearish bets.
- Bitcoin’s 30-day implied volatility, as measured by Volmex’s BVIV, jumped from 40% to 47%, indicating an increase in demand for options, or hedging contracts, in the wake of the price sell-off. BVIV is not alone: Wall Street’s equivalent, the VIX, also soared on Thursday.
- On Deribit, bitcoin and ether put options have become more expensive than call options, indicating growing demand for downside protection.
- Block flows featured BTC sell spreads, a bearish strategy. In the case of ether, traders preferred a butterfly put option, a limited risk, limited reward play that is market neutral.
symbolic talk
- Canton’s native Layer 1 blockchain token CC was the only cryptocurrency in the top 100 in the black over the past 24 hours as it managed to avoid a broader market sell-off, rising 3.35%.
- monero privacy coins zcash and run all saw heavy losses since midnight UTC, falling roughly 5% as investor optimism around the sector begins to fade.
- Despite relative weakness across the market, bitcoin dominance fell to 58.73%, suggesting investors are turning to speculative altcoin plays in an attempt to outperform the market.
- One such speculative bet, RIVER, unraveled spectacularly this week, having lost 55% of its value since Monday, compounded by a 25% drop in the last 24 hours. RIVER’s plight comes after an 884% rally between January 1 and January 26, as traders are now beginning to lock in profits.
- Friday was a volatile session for those trading tokenized silver on HyperLiquid, with data from CoinGlass showing that a long position worth $47 million was liquidated in Europe hours after the metal fell to $96.
