coindesk.com
The crypto market consolidated overnight after Tuesday's grueling selloff took bitcoin BTC$88,930.09 all the way down to $87,760.
The largest cryptocurrency has recovered slightly since bottoming out at 23:00 UTC. It recently changed hands at $89,000, firmly in the middle of a trading range that has persisted since Nov. 20, with the exception of a five-day window last week when it climbed toward $98,000 after a somewhat bullish start of the year.
This week's move to the downside coincided with risk-off sentiment in traditional markets: Nasdaq 100 and S&P 500 futures are both down by 2% since Sunday's open as Wall Street posted its biggest daily drop since October.
The risk-off trade catapulted gold and silver to a series of record highs as investors flocked to haven assets on concerns of a trade war between the U.S. and European Union, spurred by President Donald Trump's threat of tariffs over the ownership of Greenland and a retaliatory tariff proposal from his European counterparts.
A relative lack of liquidity in crypto markets led to a more severe selloff in altcoins this week, with $500 million worth of altcoin futures positions being liquidated in the past 24 hours alone, according to CoinGlass.
Derivatives positioning
- Bitcoin experienced deep liquidations during Tuesday's drawdown to $87,760 as $324 million in long trades were swept up by the volatility, while around $34 million worth of short positions were liquidated by the subsequent bounce.
- Bitcoin's 30-day implied volatility (IV) spiked to 44.34 on Tuesday, the most since Jan. 10 as traders flocked to the options market to hedge.
- Open interest(OI) for bitcoin decreased by 3.25% to $28.3 billion in the past 24 hours as prices tumbled by around 2%. A notable $300 million drop in OI at 05:00 UTC coincided with bitcoin's temporary rise to $90,000, indicating a period of profit-taking for traders in short positions.
- Global funding rates remained positive across the board throughout the selloff, presenting a glimmer of hope to crypto investors as it shows continued bullish bias despite negative price action.
- A 2.5% reduction in zcash ZEC$362.60 open interest alongside a 1.5% increase in price suggests those in short positions since Jan. 8's governance clash are beginning to reduce bearish exposure.
Token talk
- Monero XMR$499.60 led the altcoin plunge in the past 24 hours, falling by 13.6% to compound losses since its Jan. 14 record high to 37.25%.
- Ether ETH$2,952.65 tumbled by 4.5% as it underperformed other crypto majors SOL and XRP, both down by around 1.25%, while ADA remained relatively resilient, losing just 0.85%.
- Blockchain gaming token axie infinity (AXS) bucked the bearish trend, rising by more than 16% on $2.1 billion in daily volume as it surged to its highest point since September.
- AXS is now up by 165% since Jan. 13, demonstrating relative strength among metaverse tokens. The CoinDesk Metaverse Select Index (MTVS) is the best performing benchmark this year, increasing by 43.9% year-to-date while the DeFi and memecoin equivalents are down by 4.2% and 3.6%, respectively.
- WLFI$0.1706, the DeFi token linked to Trump's family, rose by 6.6% since midnight UTC. This can be attributed to elevated activity around the platform's stablecoin, USD1, which has seen circulation increase from $2.7 billion to $3.4 billion since Dec. 24.
- CoinMarketCap's "altcoin season" indicator remains at 26/100 to suggest a bearish environment for altcoins compared to bitcoin, although several altcoins are now in "oversold" territory so could be in line for a relief rally on Wednesday.