The crypto market is returning to familiar territory after a short-lived spike reaching its highest level since early February on Friday.
Bitcoin is trading below $75,000 while ether (ETH) is at $2,300, both significantly below Friday’s highs of $78,300 and $2,460.
One reason traders are optimistic is that the bitcoin futures market on the CME, a venue favored by institutions, closed at $77,540 on Friday and opened at $74,600, creating a “CME gap” that extends 3.8% higher. A similar gap occurred last week and was closed before the end of the day on Monday.
The first steps have been taken: Bitcoin has gained 1.5% since midnight UTC, suggesting sentiment is heating up after a volatile weekend.
The market fell over the weekend as shipping through the Strait of Hormuz ground to a halt after it opened on Friday. The new shutdown led to an increase in the price of crude oil from $78 to $88 per barrel.
This weighed on risk assets, with Nasdaq 100 and S&P 500 futures both down 0.59% since midnight.
Positioning of derivative products
- Market-wide, crypto open interest (OI) remained steady at nearly $120 billion over the past 24 hours. In contrast, trading volume jumped 30%, suggesting a surge in activity without a corresponding increase in new positions. This potentially indicates an increase in turnover, short-term positioning or risk rotation of traders rather than the deployment of new capital.
- OI in solana (SOL), bitcoin ether (ETH) and XRP (XRP) remained largely stable. The OI on HYPE futures decreased by 3% as the price fell, indicating capital outflows. Elsewhere, OI in the AVAX and SP 500 perpetuals increased by 6% to 10%, respectively.
- OI in AAVE futures reached an all-time high of 3.46 million tokens as collateral damage from KelpDAO’s weekend mining led to rapid withdrawals from lending platform Aave.
- Funding rates linked to BTC, ETH, and several other tokens have turned negative, indicating a bias toward short positions that would benefit from a decline in the prices of these tokens.
- BTC and ETH options on Deribit continue to trade at higher prices than calls, a sign of continued downside concerns.
- Block flows exhibited a bias toward BTC call spreads, which are directional bets, and ether straddles, a volatility play.
Symbolic discussion
- The altcoin sector was rocked by a $292 million exploit of Kelp DAO’s rsETH token over the weekend, leading to risks of contagion in the DeFi market.
- As a result, the total value locked (TVL) on Aave fell from $26.5 billion to $17.5 billion, with the exploit sparking fears of bad debts hitting Aave’s WETH pool, triggering large withdrawals and a liquidity crisis.
- Aave’s token, AAVE, rose 2.2% on Monday after falling 22% on Saturday.
- The Bitcoin-dominated CoinDesk 20 Index (CD20) rose 1% on Monday, outperforming the altcoin-weighted CoinDesk 80 (CD80) and the DeFi Select Index (DFX), which are up 0.6% and 0.9%, respectively.
- Celestia (TIA) is a particularly volatile token, remaining down 3.9% over the past 24 hours, even after surging over 4% since midnight.
- CoinMarketCap’s “Altcoin Season” indicator is at 36/100, demonstrating investors’ preference for bitcoin after Friday’s short breakout.
