Despite global stock indices hitting record levels, Bitcoin remains stagnant, highlighting its relative weakness in the market.
Data from derivatives indicates a lack of significant activity in Bitcoin and Ethereum, while some altcoins are seeing aggressive trading.
A notable $4 billion drop in Tether’s market capitalization over the past two months suggests that capital is exiting the crypto space, hinting at possible late-stage selling. For a strong recovery, Tether's supply would need to increase again.
Currently, Bitcoin BTC$64,012.12 is trading marginally higher, up 0.16% since midnight UTC, hovering around $64,000. This stagnation occurs even as global equities experience gains driven by optimism around artificial intelligence and a reduction in energy prices.
The MSCI All Country World Index has increased by 0.4%, moving toward another record close, and the Asia Pacific benchmark has climbed by 2.2%, with Australian shares also reaching new heights after the S&P 500 and Dow Jones Industrial Average hit all-time highs earlier this week.
The broader CoinDesk 20 (CD20) remains steady since midnight, with 11 components gaining and nine declining, which highlights the specific weaknesses within the crypto market. In the first half of the year, U.S. spot Bitcoin ETFs experienced net outflows totaling $5.4 billion as investors shifted their focus to AI-related assets.
“Interest in cryptocurrencies from both institutional and retail investors has diminished as AI captures a larger share of capital and attention; many sectors, including crypto, have lagged behind AI over the past year,” noted DWF Labs in a recent report.
Market direction may be influenced by upcoming U.S. employment data and ISM services PMI figures.
Circle Internet (CRCL), the issuer of the second-largest stablecoin (USDC), reported a 7% increase in second-quarter revenue year-over-year. However, the $701 million figure did not meet expectations, as reported by Bloomberg.
Galaxy Digital (GLXY) is also set to release its earnings today, while Riot Platforms (RIOT) has postponed its report indefinitely.
Derivatives Positioning
- Crypto futures sentiment: The long/short ratio in crypto futures remains bearish, with short positions making up 51% of taker volume, slightly better than the recent 52/48 split favoring bears.
- Market strength: PUMP has emerged as the top-performing token among the top 100 in the past 24 hours, surging 115%. This price increase has sparked activity in the futures market, with open interest rising by 9% to 84.76 billion tokens. However, this level of activity is not unprecedented.
- Open-interest movers: Other tokens with rising open interest include XLM, ZEC, and BNB, while SHIB, HBAR, and LTC have seen declines, likely indicating capital outflows. Bitcoin and Ethereum futures show little movement.
- Aggressive altcoin buying: Both ZEC and BTC bulls showcase positive 24-hour open-interest-adjusted cumulative volume delta, indicating a more aggressive approach among traders taking long positions. In contrast, XLM and DOGE are lagging.
- XLM funding rate: XLM stands out with a notably negative annualized perpetual funding rate of -23%, indicating bearish sentiment as perpetual contracts are trading at a discount to the spot price.
- Bitcoin volatility: Bitcoin's 30-day implied volatility index remains consistent around 36%, a level where it has previously bounced back sharply.
- Options flow: In Deribit-listed options, call options continue to dominate in volume for Bitcoin and Ethereum, indicating bullish sentiment, while bearish ether risk reversals have been noted by OTC desk Paradigm.
Token Talk
- Tether's market cap decline: Tether has experienced a $4 billion reduction in market cap over the past 60 days, marking one of the steepest contractions on record, according to CryptoQuant. This decline indicates that capital is leaving the crypto ecosystem.
- Market exhaustion: CryptoQuant suggests that such significant contractions in USDT supply often coincide with diminishing selling pressure, potentially indicating late-stage selling.
- Contrasting trends: Historical data shows that previous significant troughs in USDT supply preceded recoveries in Bitcoin. However, with Bitcoin remaining stagnant since May, the contraction may reflect waning demand. A bottom is only confirmed when USDT supply begins to increase again.
- Monitoring USDT supply: Observing the trend in USDT supply is crucial. If the 60-day change approaches zero, it may signal new capital entering the market. Conversely, continued decline suggests further outflows.