Bulls took a breather over the past 24 hours as risk-off sentiment swept through global markets and pressured bitcoin back towards $88,000.
Although the Federal Reserve’s decision to keep interest rates steady at 3.5%-3.75% was widely expected, growing geopolitical tensions and a rotation to safe-haven assets left crypto traders facing a sea of red.
Major U.S. stock indexes saw a mix of optimism and a retreat in response, with the S&P 500 briefly topping 7,000 for the first time before retreating. These indices are heavily influenced by earnings reports from major companies this week.
But in crypto, the risk vote hit hard. Bitcoin fell and the broader CoinDesk 20 (CD20) index lost 2.9%.
This exodus from crypto sent gold to record highs above $5,500 per ounce, and drew gold-backed tokens such as upward amid aggressive hoarding of the metal by Tether itself and central banks. Silver also extended gains to trade at $117 an ounce.
Bitcoin, and the broader crypto market, has continued to trade more like a liquidity-sensitive risk asset than a reliable hedge, given its deeper liquidity for investors looking to rotate out of the sector. The US Dollar Index (DXY) fell to a four-year low this week, but investors don’t see this decline as a structural shift.
Derivatives positioning
- Cumulative theoretical open interest in all crypto futures has fallen nearly 3% to $132.26 billion, indicating growing risk aversion.
- Crypto futures bets worth $348.30 million have been liquidated, marking a 13% increase in the number over 24 hours. Most of these are bullish long plays.
- Despite the post-Fed decision drop in bitcoin and ether prices, their 30-day implied volatility index remains pegged near multi-month lows. It shows that traders continue to expect generally calmer market conditions rather than panic.
- Open interest in futures linked to HYPE fell by over 12%, leading to capital outflows from major tokens including bitcoin, ether, solana and XRP.
- Annualized perpetual funding rates for the major cryptocurrencies are barely above zero now, in contrast to the 10% we saw earlier this week that signaled real bullish momentum. Funding rates for XLM have turned decisively negative as a sign of trader bias for bearish or short bets.
- In the Deribit-listed options market, sentiment remains cautious, with BTC and ETH pricing to remain on calls. Put bias is relatively stronger in ether.
- Block flows (large trades executed outside of public order books), featured BTC call spreads and ETH put calendar spreads, both strategies that aim to take advantage of low volatility and theta (time) decay.
Token talk
- Optimism’s community approved a 12-month plan to buy back OP tokens using revenue generated by their network of Ethereum layer-2 chains.
- More than 84% of the votes cast supported the measure, which passed with a quorum just before its deadline. If a final vote by the protocol common house reaches a 60% majority, the Optimism Foundation will begin converting ETH earned from sequencer fees to OP from February
- Half of Superchain’s revenue, estimated at over $17 million last year, would go to monthly token purchases. The super chain includes chains like Coinbase’s Base and World Chain.
- Some critics argued that pairing buybacks with token issuances nullified any value returned to holders. The fund pushed back, saying the buyback would help align the OP token for network growth while preserving funds for ecosystem development.
- OP’s price has fallen 80% over the past year and is now trading below 29 cents, after falling another 5% in the last 24 hours.
