The cryptocurrency market has experienced a notable decline, with Bitcoin (BTC) falling to its lowest point since April 13 and Ethereum (ETH) dropping below $2,000. This downturn is attributed to U.S. airstrikes in the Strait of Hormuz, which heightened inflation fears, leading to nearly $900 million in leveraged long liquidations.
Key Highlights
- A total of approximately $958 million in crypto positions were liquidated within a 24-hour period, with long positions constituting $897 million as investors adopted a risk-averse approach following the airstrikes.
- Despite ETH's price falling below $2,000, its open interest reached an all-time high, suggesting that traders are taking short positions in anticipation of further price drops instead of capitalizing on the dip.
- This Friday, around $8 billion in options will expire on Deribit, where Bitcoin's max pain is set at $75,000, just above the current market price. Although volatility has subsided to yearly lows, the put-call skew indicates that traders are still seeking downside protection.
As of Thursday, Bitcoin BTC$73,291.38 was trading around $73,400, reflecting a 1.2% decline since the start of the day, although it remained above its earlier low of about $73,000. Ether (ETH) fell 1.5%, marking its first dip below the $2,000 threshold since March 29.
The immediate cause of this market reaction was a surge in oil prices, which rose from $92 to $96 per barrel, ultimately settling at $94. This increase has reignited inflation concerns across various markets.
U.S. equity index futures are also under pressure, with the S&P 500 and Nasdaq 100 futures down by 0.11% and 0.25%, respectively, contributing to a general risk-averse sentiment as the American trading session approaches.
Derivatives Market Insights
- Liquidations amounted to $958.8 million in the last 24 hours, with long positions accounting for $897 million compared to $61 million in shorts. This indicates a gradual market decline rather than a rapid sell-off.
- Bitcoin's open interest remained stable, but it masked a 9.85% decrease in CME open interest to $7.56 billion, showing that regulated futures are declining while offshore perpetuals are holding steady. The funding rate is neutral at 0.0058%, indicating that traders are not leveraging their positions aggressively.
- Ether's open interest surged to a record 16.39 million ETH ($32.61 billion), up 0.61% within 24 hours, despite the price decline. This trend suggests that traders are opening short positions rather than buying in at lower prices.
- XRP's open interest dropped 0.49% to 2.28 billion XRP ($2.94 billion) as its price softened, indicating that bullish positions are being closed rather than new shorts being established. Perpetual funding rates for XRP and SOL have also turned negative, indicating a leaning towards short positions.
- On Friday, options worth about $8 billion will expire on Deribit, including $6.5 billion in Bitcoin (approximately 86,000 contracts) and $1.4 billion in Ethereum. Bitcoin's max pain point is at $75,000, slightly above the current price, with substantial put notional clustered around that strike and significant open interest at the $80,000 level, which coincides with the 200-day moving average.
- Deribit’s DVOL volatility index is currently around 36, placing it in the eighth percentile for the past year, while Ether's volatility is at its lowest since early 2024. Nevertheless, the 25-delta put-call skew remains elevated, indicating that traders are willing to pay for immediate downside protection despite overall volatility being low.
Market Observations
- The CoinDesk Computing Select Index (CPUS) decreased by 2.9% following the declines in Bitcoin and Ether, impacting the broader altcoin market.
- Several altcoin pairs experienced liquidity issues, resulting in exaggerated price movements. For instance, Humanity protocol (H) fell over 30% before quickly recovering and has since surged 26% since midnight UTC.
- Such sell-offs often erase resting orders from the order book, creating opportunities for traders as bids and asks gradually return.
- AI-focused tokens like RENDER and FET also faced challenges, dropping by 5.5% and 8.5%, respectively, while DeFi tokens JUP and ETHFI lost approximately 5% each.
- CoinMarketCap's "Altcoin Season" indicator has plummeted to its lowest level in over 90 days, currently sitting at 30/100, reflecting a broader risk-off sentiment among investors.