Crypto market sales accelerated overnight with bitcoin and ether down a further 2.7% and 3.5% respectively since midnight UTC to compound Thursday’s miserable session.
The decline comes alongside heavy losses for precious metals, with silver now trading at $96 after falling 20% from Thursday’s record high of $121. Gold is trading back below $5,000 after falling 11% from Wednesday’s $5,600 high.
US stock index futures ticked lower, while the dollar index ( DXY ) rose 0.57%, supported by expectations that Kevin Warsh looks set to become the new chairman of the Federal Reserve.
The global market selloff, which saw bitcoin hit its lowest level since November, led to $1.8 billion in liquidations across crypto markets as leveraged traders were caught off guard by the sharp drop despite a weak start to the year for crypto.
The bitcoin-dominant CoinDesk 20 Index (CD20) is now down 6.6% since the turn of the year, while the altcoin-heavy CoinDesk 80 (CD80), which is outperforming its counterpart, has lost 2.28%.
Derivatives positioning
- The market swooned out of $1.8 billion worth of leveraged crypto futures bets in 24 hours. This represents massive wealth destruction beyond the drop in market value. It typically takes time to rebuild investor confidence as a result of such losses.
- Open interest (OI) in futures linked to most major cryptocurrencies, including bitcoin and ether, has fallen along with large liquidations. DOGE stands out with a 2% increase in OI, reflecting traders’ shorting of the dive. An increase in OI along with a decrease in price is said to indicate that.
- Annualized perpetual funding rates for BTC, ETH, XRP and several other tokens have turned negative, a sign of increasing demand for downside bets.
- Bitcoin’s 30-day implied volatility, as measured by Volmex’s BVIV, jumped to 47% from 40%, indicating an increase in demand for options or hedging contracts in the wake of the price selloff. BVIV is not alone, Wall Street’s equivalent, the VIX, also rose on Thursday.
- On Deribit, bitcoin and ether puts have become more expensive than calls, indicating increasing demand for downside protection.
- Block flows contained BTC put spreads, a bearish strategy. In ether’s case, traders preferred a put butterfly, a market-neutral limited-risk, limited-reward game.
Token talk
- Layer-1 blockchain Canton’s native token, CC, was the only top-100 cryptocurrency in the black over the past 24 hours as it managed to avoid a broader market selloff, rising 3.35%.
- Privacy coins monero zcash and line all have experienced heavy losses since midnight UTC, falling by approx. 5% as investor optimism around the sector begins to wane.
- Despite relative weakness across the market, bitcoin dominance fell to 58.73% to suggest investors are opting for speculative altcoin plays in an attempt to outperform the market.
- One of those speculative bets, RIVER, was spectacularly liquidated this week as it has lost 55% of its value since Monday, compounded by a 25% drop over the past 24 hours. RIVER’s plight comes after an 884% rally between January 1 and January 26 as traders now begin to lock in profits.
- Friday was a volatile session for those trading tokenized silver on HyperLiquid, with CoinGlass data showing that a long position worth $47 million was liquidated in European hours after the metal fell to $96.
