Bulls took a breather over the past 24 hours as risk aversion swept global markets, pushing Bitcoin back to around $88,000.
Although the Federal Reserve’s decision to keep interest rates steady between 3.5% and 3.75% was widely expected, growing geopolitical tensions and the rotation toward safe-haven assets have left crypto traders facing a sea of red.
Major stock indexes in the United States saw a mix of optimism and pullback in response, with the S&P 500 briefly topping 7,000 for the first time before retreating. These indices are strongly influenced by the results of the largest companies published this week.
But in the crypto space, risk aversion has been hit hard. Bitcoin slipped and the broader CoinDesk 20 Index (CD20) lost 2.9%.
This crypto exodus has seen gold surge to record highs above $5,500 an ounce, driving gold-backed tokens like on the rise amid aggressive accumulation of the metal from Tether itself and central banks. Silver also extended its gains to trade at $117 an ounce.
Bitcoin, and the broader crypto market, has continued to trade more as a liquidity-sensitive risk asset than a reliable hedge, given its greater liquidity for investors looking to exit the sector. The U.S. Dollar Index (DXY) fell to a four-year low this week, but investors do not view the decline as a structural change.
Positioning of derivative products
- Cumulative notional open interest across all crypto futures fell nearly 3% to $132.26 billion, indicating increasing risk aversion.
- Crypto futures bets worth $348.30 million were liquidated, representing a 13% increase in the 24-hour total. Most of them are bullish long plays.
- Despite the drop in bitcoin and ether prices after the Fed’s decision, their 30-day implied volatility indexes remain near multi-month lows. This shows that traders continue to expect overall calmer market conditions rather than panic.
- Open interest in HYPE-linked futures fell by more than 12%, leading to outflows from major tokens including Bitcoin, Ether, Solana, and XRP.
- Annualized perpetual funding rates for the largest cryptocurrencies are now barely above zero, unlike the 10% we saw earlier this week that signaled real bullish momentum. Funding rates for XLM have turned significantly negative, a sign of traders’ penchant for bearish or short bets.
- In the options market listed on Deribit, the mood remains cautious, with BTC and ETH puts remaining higher than calls. The put bias is relatively stronger in ether.
- Block flows (large trades executed outside of public order books) included BTC call spreads and ETH put calendar spreads, two strategies aimed at taking advantage of low volatility and theta (time) decay.
Symbolic discussion
- The Optimism community has approved a 12-month plan to buy back OP tokens using revenue generated from its layer 2 Ethereum blockchain network.
- More than 84% of participating votes supported the measure, which reached a quorum just before the deadline. If the protocol’s Joint House final vote reaches a 60% majority, the Optimism Foundation will begin converting ETH earned from sequencer fees into OP starting in February.
- Half of the Superchain’s revenue, estimated at more than $17 million last year, is believed to be spent on monthly token purchases. The Superchain includes chains like Coinbase’s Base and World Chain.
- Some critics have argued that the combination of buybacks and token issuances negates any value returned to holders. The foundation pushed back, saying the buyout would help align the OP token with network growth while preserving funds for ecosystem development.
- OP’s price is down 80% over the past year and is now trading below 29 cents, after falling another 5% in the last 24 hours.
