Crypto markets fell on Wednesday after new airstrikes in Iran fueled risk-on sentiment among investors. The CoinDesk 20 Index was down 2.9% since midnight UTC, with all but one token down.
Addressing NATO leaders, US President Donald Trump declared the ceasefire “over” and said talks with Iran are a “waste of time”, although talks are continuing, according to news reports.
The US Central Command said it hit more than 60 small Islamic Revolutionary Guard Corps boats to prevent them from disrupting international shipping, and Iran retaliated with attacks on Kuwait and Bahrain.
The dollar index (DXY) rose as renewed tensions are likely to fuel inflation concerns. Bitcoin and ether (ETH), the two largest cryptocurrencies, fell more than 2%.
There were sharper losses across the more illiquid altcoin sector, as JUP, ETHFI and PUMP all lost more than 5%.
US stocks also took a hit. Nasdaq 100 index futures and S&P 500 index futures fell as much as 1.5%.
Derivatives positioning
- Despite bitcoin’s drop to $62,000, it’s still up 6% this month, and there’s some good news on the derivatives front: Traders don’t appear to be short-circuiting the rally. Open interest (OI) in futures has fallen to 730K BTC from over 740K BTC a day ago.
- Ether is not doing so well. Open interest has remained steady at around 13.95 million tokens despite the spot price drop that triggered liquidations of $90 million worth of bets. BTC 24-hour liquidations are just over $100 million.
- The sell-off in Canton Network’s CC token has accelerated, with the token’s price falling to its lowest level since January, as futures rates rise to a two-week high. This combination points to the possibility of traders shorting the decline, especially as funding rates remain deeply negative, close to -20%.
- Broadly, the bear grip has tightened across major cryptocurrencies, including BTC and ETH, as indicated by their negative 24-hour OI-adjusted cumulative volume delta. A negative reading indicates that price action is being driven by traders placing market orders rather than passive limit orders.
- The recent decline in BTC and ETH appears to have spurred options hedging demand as their respective 30-day implied volatility indices, BVIV and EVIV, are up for the second day in a row.
- Choices skewed at Deribit confirm that. One-week bias has risen to nearly 20% in favor of puts from 16% a day ago. Puts offer protection against a price drop in the underlying asset, in this case BTC. The same applies to ether.
- However, 24-hour volume figures show the highest activity in BTC call options at the $80,000 strike price.
Token talk
- The altcoin market is on a roll, with $350 million of the $450 million in liquidations attributed to altcoin trading pairs, according to CoinGlass.
- Solana (SOL) has now fully recovered a rally that began on July 2, trading back to $77 after challenging $84 on Monday.
- A sign countering the bearish sentiment is MORPHO. The DeFi token is up 4% since midnight as total value locked (TVL) on the protocol hit a record 4 million ETH this week, according to DefiLlama.
- A beacon of hope for the altcoin market is that several tokens are now dipping back into “oversold” territory, with the average Relative Strength Index (RSI) falling to 40/100 from 47/100 on Tuesday.
