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The crypto market is tired after the relentless wave of selling pressure on Tuesday. Several assets have settled down now as they begin to establish support levels, although if the US dollar continues to show strength, it could signal a prolonged downside period.
Bitcoin rose about 1% as of midnight UTC after two days of declines that saw it drop to the lowest price since June to a point. Ether that slipped as much as 20% on the hour of 48 – the strongest drop in three months – added 2%.
While the CoinDesk 20 Index, a measure of the largest cryptocurrencies, is 2.5% lower over 24 hours, which almost reflects yesterday’s action: It has increased by 2.2% since midnight UTC and only one constituent, is lower.
The altcoin market is in worse shape than bitcoin, which continues to cling to the $99,000 support level.
Several tokens have retraced all their rallies since July, suggesting that a short-lived “altcoin season” has concluded with the focus returning to BTC and whether it can weather this recent storm.
Derivatives positioning
For sasham who was.
- The BTC futures market reflects growing caution. Open interest (OI) declined to $25.3 billion from $26 billion last week, suggesting traders are reducing leverage. Seen against the year-high BTC price, the drop indicates that the relative amount of leverage in the market has not kept pace with the appreciation of the asset.
- The three-month annualized base is suppressed to 3%-4%, indicating that the underlying trade is currently unattractive. Financing rates are mixed but low in the main locations (4%-9% annualized), reinforcing a lack of strong commitment to the trend and general caution of the market from the future.
- The bitcoin options market is showing mixed but volatile signals.
- Implied volatility (IV) is high in all timeframes, indicating the expectation of high near-term movement. Structurally, the structure of term IV shows a short-term backwardation (downward slope) before resuming a long-term contango (upward slope).
- Despite this volatility, recent trading bias has returned to bullish, with 24-hour put-call volume tilting 58%-42% in favor of calls, indicating an active upside preference.
- The recent price drop was heavily influenced by leveraged contracts, with $1.7 billion in liquidations in the last 24 hours split 76%-24% in favor of long positions. ETH led the notional loss with $572 million liquidated.
- Crucially, the average long liquidation volume over the past two days of $1 billion is significantly higher than the seven-day average of $620 million, confirming the amplified impact of forced selling on current price action.
- Going forward, a rebound may face immediate resistance, with a key price level at $102,500 having $124 million in potential liquidations.
Token Talk
By Oliver Knight
- The altcoin market remains in oversold territory after Tuesday’s grueling selloff that saw several tokens fall to their lowest in months.
- U crypto average relative strength index (RSI) is at 38/100, with tokens including OKB, SKY and FLR press figures up to 23/100. This suggests that while the overall crypto market is bearish, a short-term relief rally may be on the cards.
- Any suggestion of a bounce would be invalidated if bitcoin and ether break below its respective support levels at $99,000 and $3,100.
- If further downside in BTC and ETH were to occur, altcoins would fare worse due to a lack of liquidity and skewed levels of leverage. This means that altcoin order books do not have enough buy orders to absorb the selling pressure and subsequent liquidations, resulting in dramatic spikes on the side.
- Traders wonder if the recent “altcoin season” is officially over with most tokens, with the exception of privacy coins, eroding their rallies from July and August.
- The privacy coin narrative remains a key driver in the current market, while DCR and ZEC cooled on Wednesday, XMR rose 7% and the entire sector remains significantly higher in the past month.
