Crypto Market Liquidation Accelerated Overnight With Bitcoin and ether down a further 2.7% and 3.5%, respectively, since midnight UTC, making Thursday’s miserable session worse.
The drop comes with heavy losses for precious metals, with silver now trading at $96 after a 20% decline from Thursday’s record $121. Gold fell back below $5,000 after falling 11% from Wednesday’s high of $5,600.
U.S. stock index futures fell while the dollar index (DXY) posted a 0.57% gain, buoyed by expectations that Kevin Warsh appears poised to become the new chairman of the Federal Reserve.
The global market rout, which saw bitcoin hit its lowest level since November, led to $1.8 billion in selloffs across crypto markets as leveraged traders were caught off guard by the precipitous fall despite a weak start to the year for crypto.
The bitcoin-dominated CoinDesk 20 Index (CD20) is now down 6.6% year to date, while altcoin heavyweight CoinDesk 80 (CD80), outperforming its peer, has lost 2.28%.
Positioning of derivative products
- The market collapse shook leveraged cryptocurrency futures bets worth $1.8 billion in 24 hours. This represents a massive destruction of wealth, on top of the decline in market capitalization. Investor confidence shaken by such losses usually takes time to recover.
- Open interest (OI) for futures contracts tied to most major cryptocurrencies, including bitcoin and ether, has declined alongside large selloffs. DOGE stands out with a 2% increase in OI, reflecting traders shorting the decline. A slight increase in OI alongside a fall in prices would indicate this.
- Annualized perpetual funding rates for BTC, ETH, XRP and several other tokens have turned negative, a sign of growing demand for bearish bets.
- Bitcoin’s 30-day implied volatility, as measured by Volmex’s BVIV, increased from 40% to 47%, indicating an increase in demand for options, or hedging contracts, following the price drop. The BVIV is not alone, its Wall Street equivalent, the VIX, also climbed on Thursday.
- On Deribit, puts on Bitcoin and Ether have become more expensive than calls, indicating a growing demand for downside protection.
- Block flows featured BTC put spreads, a bearish strategy. In the case of ether, traders favored a butterfly put, a neutral play with limited risk and limited reward.
Symbolic discussion
- Guangzhou’s native CC token of the layer 1 blockchain was the only top 100 cryptocurrency in the black over the past 24 hours as it managed to avoid a market sell-off, rising 3.35%.
- Privacy Coin Monero zcash and rush all have suffered heavy losses since midnight UTC, falling around 5% as investor optimism around the sector begins to fade.
- Despite the relative weakness in the market, Bitcoin’s dominance has dropped to 58.73%, suggesting that investors are opting for speculative plays on the altcoin in a bid to outperform the market.
- One of these speculative bets, RIVER, has performed spectacularly this week, having lost 55% of its value since Monday, compounded by a 25% drop in the last 24 hours. RIVER’s plight comes after an 884% surge between January 1 and 26, as traders now begin to make profits.
- Friday was a volatile session for those trading token silver on HyperLiquid, with CoinGlass data showing a long position worth $47 million was liquidated in European hours after the metal fell to $96.
