Thursday’s liquidation was one of the most brutal and devastating in the history of the crypto market: more than $2.6 billion was liquidated in the form of bitcoin. fell to $60,000, marking its lowest level since October 2024.
This pullback made bitcoin the third most “oversold” in its history, according to the relative strength index (RSI), a momentum oscillator that tracks market conditions. Oversold conditions of this magnitude historically precede a major rebound.
Things got a little better as Asia woke up, with bitcoin rising from $60,000 to over $65,000, while ether fell to a low of $1,750 to return to $1,920.
Despite this, the broader crypto market remains in a bear market. Zcash Privacy Coin lost 34% of its value over the past week, while optimism Solana and ether all suffer losses of around 30%.
Traditional markets have also struggled in recent days. The Nasdaq 100 index has fallen 6% since January 28, and the precious metals gold and silver are down 12% and 38%, respectively, over the same period.
Positioning of derivative products
- The cryptocurrency futures market is worth less than $100 billion for the first time since March 2025, as traders continue to reduce risk as prices fall and liquidations lead to wealth destruction.
- More than $2.6 billion in leveraged futures bets were liquidated or forced to be closed by exchanges due to a lack of margin in 24 hours. Of that amount, more than $2.10 billion were long bets. This shows the degree of bullish leverage deployed around the crucial $70,000 support, which was breached on Thursday.
- Open interest (OI) has declined in futures contracts linked to all major tokens, including the recent outperformer HYPE.
- Annualized perpetual funding rates for major tokens such as BTC, SOL, XRP, and DOGE have turned negative as falling prices triggered demand for bearish bets. Negative rates could lead arbitrageurs to resort to reverse cash bets and carry bets.
- Bitcoin’s 30-day annualized implied volatility surged to nearly 100% late Thursday as traders rushed to buy puts, with some resuming those bearish bets at strike prices as low as $20,000. Since then, volatility has fallen below 70%. A similar trend is observed in ether implied volatility.
- Nonetheless, short-term puts on bitcoin and ether continue to trade at a volatility premium of 20 points or more over calls, a sign of lingering downside concerns. Put options also remain more expensive in the long term.
- Options linked to BlackRock’s IBIT ETF saw record activity Thursday as traders rushed to buy puts. The one-year skewness rose to over 25 points, reflecting a massive premium for puts, indicating a spike in fear.
Symbolic discussion
- The altcoin sector presented some unlikely winners despite the broader market decline on Thursday. Privacy-focused decree rose 31% in 24 hours, seemingly unfazed by the carnage that added to a rally that took it from $17.4 to $24.2.
- HyperLiquid’s HYPE token continues to perform well, relatively speaking, as it remains up 11% this week despite a 4% decline over the past 24 hours.
- XRP was one of the most volatile altcoins, diving more than 30% before rebounding 21%. Trading volume exceeded $14 billion, a 143% increase over 24 hours.
- The CoinDesk 20 (CD20) and CoinDesk 80 (CD80) both fell around 6% over the past 24 hours, but the area of concern in the market was DeFi, with the DeFi Select Index (DFX) underperforming the broader market with a drop of over 10%.
- CoinMarketCap’s “altcoin season” indicator is now at 24/100, down from Wednesday’s high of 32/100, suggesting investors are looking for safer, less volatile assets like bitcoin or stablecoins.
