The crypto market is tired after relentless waves of selling pressure on Tuesday. Several assets have now settled as they begin to establish support levels, but if the US dollar continues to show strength, it could signal a period of extended downside.
Bitcoin rose about 1% since midnight UTC after two days of declines, at one point falling to its lowest price since June. Ether which slipped as much as 20% in the 48 hours – the steepest drop in three months – added 2%.
While the CoinDesk 20 index, a measure of the major cryptocurrencies, is down 2.5% over 24 hours, it largely mirrors yesterday’s action: It’s up 2.2% since midnight UTC and only one component, is lower.
The altcoin market is in worse shape than bitcoin, which continues to cling to the $99,000 support level.
Several tokens have now retraced their entire rallies from July, suggesting that a short-lived “altcoin season” has ended with the focus moving back to BTC and whether it can weather this latest storm.
Derivative positioning
By Saksham Diwan
- The BTC futures market reflects increasing caution. Open interest (OI) has fallen to $25.3 billion from $26 billion last week, suggesting traders are reducing leverage. Compared to the higher BTC price year-over-year, the decline indicates that the relative amount of leverage in the market has not kept pace with the increase in value.
- The three-month annualized basis is subdued to 3%-4%, signaling that the underlying trade is currently unappealing. Funding rates are mixed but low across major venues (4%-9% y/y), reinforcing the lack of strong trend engagement and overall market caution from the futures side.
- The bitcoin options market is showing mixed but volatile signals.
- Implied volatility (IV) is high across all maturities, indicating elevated expectations for near-term movements. Structurally, the IV term structure shows short-term decline (downward slope) before resuming a long-term contango (upward slope).
- Despite this volatility, recent trading bias has returned to bullish, with 24-hour put-call volume leaning 58%-42% in favor of calls, indicating active upside preference.
- The recent price drop was heavily influenced by leveraged liquidations, with $1.7 billion in liquidations over the past 24 hours split 76%-24% in favor of long positions. ETH led the notional losses with $572 million liquidated.
- Crucially, the average long liquidation volume over the past two days of $1 billion is significantly higher than the seven-day average of $620 million, confirming the amplified effect of forced selling on the current price action.
- Looking ahead, a bounce could meet immediate resistance, with a key price level at $102,500 with $124 million in potential liquidations.
Token Talk
By Oliver Knight
- The altcoin market remains in oversold territory after Tuesday’s grueling selloff, which saw several tokens fall to their lowest in months.
- The average relative crypto strength index (RSI) is at 38/100, with tokens including OKB, SKY and FLR printing numbers as low as 23/100. This suggests that while the overall crypto market is leaning bearish, a short-term relief rally may be in play.
- Any suggestion of a bounce would be invalidated if bitcoin and ether break below their respective support levels at $99,000 and $3,100.
- If further downside were to occur in BTC and ETH, altcoins would underperform due to lack of liquidity and skewed levels of leverage. This means that altcoin order books simply do not have enough buy orders to absorb the selling pressure and subsequent liquidations, resulting in dramatic increases to the downside.
- Traders will wonder if the latest “altcoin season” is officially over with the majority of tokens, with the exception of privacy coins, eroding their rallies from July and August.
- The privacy coin narrative remains a key driver in the current market, while DCR and ZEC cooled on Wednesday, XMR rose 7%, and the entire sector remains significantly higher over the past month.
