Crypto markets demonstrated fragility on Friday with bitcoin trading narrowly above a psychological support level at $70,000.
The biggest cryptocurrency broke above this level on Wednesday, rising as high as $74,000 before failing to exploit a lower liquidity zone above and falling back along with US stocks.
The intensifying war in the Middle East pushed oil to a new cycle high of $85 a barrel. barrel. Brent oil has risen approx. 42% since the start of the year. The rise in energy costs, along with growing uncertainty surrounding Iran, has prompted traders to reassess the inflation outlook in Europe, with money markets now even pricing in the possibility of a year-end European Central Bank rate hike – a sharp reversal from expectations of rate cuts in 2025.
Higher interest rates will typically weigh on bitcoin and the broader crypto market as investors shift toward safer assets that offer attractive returns without the volatility associated with risk 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 for 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 of speculative interest.
- While retail funding remains stable in the 0%-to-10% range, Binance has fallen to -2.5%, signaling a local increase in short hedging.
- The three-month basis is holding at 2.7%, a sign that institutional conviction remains soft.
- The options market has shifted towards cautious optimism. The 24-hour call volume spread has tightened to 51/49 and the one-week 25-delta bias has cooled to 8% (from 15%), significantly lowering the cost of downside protection.
- While longer-dated implied volatility (IV) remains stable near 50%, in the near term it has risen to a sharp decline, a signal that traders are pricing in an immediate high-impact volatility event ahead of a return to growth in the medium term.
- Coinglass data shows $257 million in 24-hour liquidations, with a 70-30 split between longs and shorts. BTC ($121 million), ETH ($51 million) and others ($15 million) led the way in fictitious liquidations.
- The Binance liquidation heatmap indicates $71,600 as a core liquidation level to monitor in the event of a price rally.
Token talk
- Decentralized finance (DeFi) tokens MORPHO and JUP led Friday’s selloff, losing between 2% and 3% since midnight UTC as traders rotated out of speculative tokens back into dollars.
- OKX’s native OKB token was the biggest gainer in the last 24 hours, rising 23% after trading giant Intercontinental Exchange (ICE) signed an agreement with the exchange to introduce tokenized stocks and crypto futures products.
- There were also significant gains for KITE and RIVER, each up around 15% in the past 24 hours to continue their impressive start to the year.
- Privacy tokens continued to lose ground with zcash (ZEC) and decred (DCR) falling 6% in the past 24 hours and the decline accelerating since midnight UTC.
