The cryptocurrency market faced significant selling pressure on Thursday, causing prices to fall sharply. Bitcoin dropped to approximately $61,300 at 02:00 UTC but later rebounded to around $64,680, currently trading at about $62,500.
Ether fell by 3% since midnight UTC, settling around $1,750. Other altcoins experienced even steeper losses, with NEAR, ZEC, and JUP each declining over 13%.
This market downturn triggered liquidations totaling $1.7 billion in futures positions, with $750 million linked to bitcoin and $390 million to ether.
Traders seem to be moving away from cryptocurrencies in favor of AI narratives in traditional financial markets, contributing to the ongoing geopolitical uncertainty and a market structure that has yet to stabilize following October’s significant downturn.
Derivatives Insights
- The total trading volume in futures rose by 2.9% to $305 billion over 24 hours, indicative of heightened activity that is not panic-driven. However, open interest plummeted by 8.5% to $111.4 billion, signaling that leveraged positions are being liquidated rather than new ones being entered.
- The extent of the liquidations has been stark: About $3 billion in leveraged positions have been erased in just two days, including $1.7 billion over the last 24 hours alone.
- Bitcoin’s open interest has decreased to 766,000 BTC from a peak of over 800,000 BTC reached yesterday. This decline indicates that many leveraged long positions were eliminated during the price drop, and bears are not aggressively placing new bets on bitcoin currently. The same trend is noted for ether and XRP.
- Solana is an exception to this trend. Open interest in SOL has surged to an all-time high of 72.16 million tokens despite a drop in prices, indicating a likely increase in short positions. This move comes as SOL fell below its February low, while BTC, ETH, and XRP managed to hold above theirs.
- TRX and ADA are also experiencing increasing open interest alongside falling prices, hinting at similar short accumulation in those markets.
- The general sentiment in the derivatives market remains bearish. The cumulative volume delta over the past 24 hours across the top 20 tokens is negative, indicating traders are opting to sell at market prices instead of placing limit orders. This active participation suggests a potential for further declines.
- Implied volatility is also on the rise. The 30-day implied volatility indexes for bitcoin (BVIV) and ether (EVIV) by Volmex have surged in the last three sessions, reflecting increased demand for options-based hedging and heightened expectations for ongoing price fluctuations.
- Put skews have tightened for both bitcoin and ether, indicating that investors are willing to invest in downside protection. The $60,000 strike put option on Deribit has over $1 billion in notional open interest. As spot prices approach this strike, significant position adjustments are likely, increasing the probability of volatility.
- The $55,000 put option emerged as the most actively traded in the last 24 hours, further emphasizing the bearish mood in the derivatives market.
Market Updates
- The altcoin sector lagged behind the major cryptocurrencies on Thursday. The previously high-flying HYPE dropped 12% after reaching record levels earlier this week.
- Other coins like DASH, ENA, and FET also suffered declines exceeding 10% since midnight UTC, reflecting challenges in liquidity for altcoin pairs once again.
- Generally, market depth on altcoin pairs is lower compared to that of bitcoin or ether, making it easier for prices to move significantly with less capital. This, combined with recent liquidations, has caused pronounced price declines.
- Monero (XMR), although down by 4% since midnight, remains positive over the last 24 hours. Trading around $347, it seems largely unaffected by the overall market downturn.
- The trajectory for many altcoins will hinge on bitcoin’s ability to sustain prices above $60,000. A dip below this level could lead to further liquidations, applying additional pressure on less liquid altcoin pairs.