The crypto market saw a recovery on Monday with bitcoin up 2.1% since midnight UTC and ether (ETH) up 3.1%. Bigger gains took place in the altcoin market, with tokens such as chiliz (CHZ), and optimism recording progress of more than 6%.
Despite the improvement in sentiment, investors remain concerned as the conflict with Iran enters its fifth week. Although Pakistan has declared its readiness to host “meaningful” peace talks, markets are not yet accepting this. Brent crude jumped to $108 a barrel over the weekend, signaling deep skepticism that a resolution is approaching. It was trading around $70 before the start of hostilities.
US stock index futures reacted well to Pakistan’s comments: Nasdaq 100 and S&P 500 futures both rose 0.25%, and the dollar index (DXY) was little changed at 100.2 points.
The crypto market remains in a downtrend over longer time frames, characterized by a series of lower highs and lower lows dating back to October. Bitcoin has remained in the same trading range since early February, failing to break above $75,000 on the upside or above $62,800 on the downside.
Positioning of derivative products
- Growth in Bitcoin futures open interest (OI) has stalled since hitting a near two-month high of 748.65 BTC on Saturday. Near-zero perpetual funding rates and a negative 24-hour cumulative volume delta (CVD) suggest a bias toward short, bearish positions.
- BTC OI declined significantly during the spot price rebound from the Asian session low of around $65,000. This shows that the rally is largely spot driven and has yet to gain support from leveraged traders.
- On Bittfinex, the number of BTC/USD long positions reached its highest level since November 2023. Historically, this is a contrary indicator, coinciding with price declines.
- The OI in most major tokens, including XRP, ETH, DOGE, and SOL, remained largely stable over 24 hours.
- AVAX and LTC stand out with double-digit percentage gains in OI futures, a sign of capital inflows. Most capital flows, however, appear to be linked to bearish bets, as indicated by their negative CVDs.
- Bitcoin’s 30-day implied volatility index is under pressure again, falling near 55% after hitting 58% over the weekend. Overall, the index continues to indicate market calm despite the turmoil caused by the war in Iran in traditional markets. The Ether Volatility Index suggests the same.
- On Deribit, BTC and ETH puts continue to cost more than calls across all time periods, a sign of continued downside concerns. Dealer gamma is mostly positive between $65,000 and $70,000, meaning dealers could buy low and sell high, potentially keeping prices in a range.
Symbolic discussion
- The CoinDesk Memecoin Index (CDMEME) and DeFi Select Index (DFX) were the two best-performing benchmarks on Monday, up 2.8% and 2.2%, respectively, while the Bitcoin-dominated CoinDesk 20 (CD20) added 1.5%.
- The perceived strength of the altcoin market can be attributed to the lack of market-wide liquidity. When prices fell on Friday, the volume of supply on exchanges exceeded demand. This pushed several assets into “oversold” territory as the move was overdone, leading to today’s relief rally.
- This lack of liquidity has plagued the crypto market since October, when a $19 billion liquidation event wiped out market structure, leaving several traders and market makers stranded in its wake.
- In order to break this cycle, market anchor bitcoin needs to return above $80,000 and consolidate, which would mean gains could shift to the more speculative altcoin market to establish macro support levels.
