Layer-2 and decentralized finance (DeFi) tokens propelled a broad upswing in the cryptocurrency market as concerns over recent Federal Reserve interest rate hikes dissipated.
Starknet and Arbitrum Surge Over 17% as 10-Year Treasury Yield Dips Below 5%
By Oliver Knight, Omkar Godbole | Edited by Sheldon Reback 27 min ago 4 min read
Altcoins lead the way (CoinDesk data)- Bitcoin climbed above $78,000 during the European trading session, reflecting a 2.1% increase since midnight UTC.
- Layer-2 and DeFi tokens spearheaded the movement, with Starknet (STRK) increasing by 18%, Arbitrum (ARB) by 17%, and Uniswap (UNI) by 13%, while the DeFi Select Index rose by 8.3%.
- A more favorable macroeconomic environment contributed to these gains, as the 10-year Treasury yield fell below 5% and Brent crude prices dropped below $103, alleviating inflationary concerns following the Fed's rate hike.
The cryptocurrency market's rebound post-Fed hike continued into Friday, with DeFi and layer-2 tokens taking the lead, shifting away from the privacy and safe-haven assets that had previously dominated Thursday's gains. This trend indicates a renewed appetite for riskier assets.
Bitcoin BTC$78,218.93 surpassed $78,000 during the European morning session, marking a 2.1% rise since midnight UTC and a 1.9% increase over the last 24 hours. Despite this progress, it remains 5% short of the September 4 monthly peak of $82,284, after two weeks of relatively stable pricing.
Nearly all constituents of the CoinDesk 100 index experienced gains, but particular attention is on the DeFi Select Index (DFX), which surged by 8.3% since midnight and 16% in the past 24 hours.
These market advances are attributed to a more favorable macroeconomic backdrop, with the 10-year Treasury yield falling back under 5% and Brent crude prices easing below $103 after reaching $109 earlier in the week, which has reduced the inflation worries that arose after the recent rate hike.
Additionally, equity index futures displayed positive movement, with S&P 500 and Nasdaq 100 futures up by 0.3% and 0.6%, respectively, while gold and silver prices increased by 1.1% and 2.8%, respectively.
Derivative Market Insights
- Futures Market Indicates Resurgence in Positional Trading: The crypto futures market is showing signs of a revival in positional trading, highlighted by nearly a 5% increase in cumulative open interest (OI) to $141.2 billion, despite a 3% decrease in daily trading volume to $95 billion. The balanced taker buy-sell volume suggests that capital is flowing into the market more structurally rather than through aggressive momentum trading.
- Bitcoin Open Interest Grows with Price Increase: Open interest in Bitcoin futures rose to 680K BTC from 670K BTC since midnight UTC, indicating a slight uptick alongside Bitcoin's price increase. This trend typically reflects a build-up of long positions. However, this increase is modest, and the current open interest remains significantly lower than the peak of 800K BTC observed earlier this year, indicating light overall positioning.
- Binance Trader Ratios Reflect Institutional Confidence: The long-short account ratio for top traders on Binance has decreased to 1.52, still indicating bullish sentiment but lower than the nearly 2 recorded on Wednesday. Meanwhile, the long-short positions ratio remains high at 2.36, indicating that while fewer large holders are taking long positions, those that are have significantly increased their investment sizes, signaling strong institutional confidence.
- Uniswap Futures Open Interest Approaches Record Levels: Among altcoins, open interest in futures linked to Uniswap's UNI surged to 86.61 million tokens, nearing an all-time high, up from 76.89 million tokens the previous day. This growth underscores significant capital inflows, coinciding with a 30% surge in the token’s spot price, driven by growing market optimism regarding favorable regulatory developments from the SEC and CFTC.
- Bullish Momentum Dominates Major Tokens’ Volume Delta: The positive sentiment is also evident in the 24-hour open interest-adjusted cumulative volume delta, which is favorable for most major tokens, with the exception of GRAM, SHIB, HBAR, and BNB. A positive reading indicates that bullish traders are more aggressive, opting for market orders rather than passive limit orders.
- Implied Volatility Declines to May Lows: Following the completion of significant events, including the Clarity Act vote and the interest rate meetings of the Fed and Bank of Japan, Bitcoin’s annualized 30-day implied volatility index, BVIV, has fallen to 36%, a level that has held since May. This decline signals expectations for a period of market stability.
- Options Skew Turns Short-Term Bullish for BTC and ETH: In options traded on Deribit, Bitcoin’s one-week put-call skew has turned positive, indicating a relative abundance of bullish calls compared to puts. However, one- and two-month skews still exhibit a slight bias toward puts. Ethereum’s one-week skew also reflects bullish sentiment, though the 24-hour volume rankings show a mixed outlook with both Bitcoin calls and puts appearing among the most actively traded options.
Token Performance Highlights
- The DeFi Select Index's Friday gains were largely driven by Uniswap (UNI), which rose by 13% since midnight UTC and 25% over the past 24 hours, alongside Ethena (ENA) increasing by 9.6% and the liquid-staking token Lido LDO$0.3777, which gained 6.6%.
- Layer-2 tokens matched the strength of DeFi, with Starknet STRK$70.95·Market Closed up 18% for the day and 21% over 24 hours, Arbitrum ARB$0.2072 up 17% and 25%, Stacks STX$0.2779 up 9.2%, and Optimism OP$0.1103 up 8.9%. STRK has reached its highest value since June 19, while ARB, priced at 20.9 cents, has not been this high since January.
- Solana (SOL) appreciated by 4.5% to $106.14, but the more pronounced activity was within its ecosystem, where the Solana-based DEX token Raydium RAY$1.7005 jumped 16% to $1.71, while the liquid-staking token Jito JTO$0.4544 increased slightly by 1.6%, indicating a focus on DEX volume rather than a broad chain-wide rally.
- Zcash (ZEC), which led on Thursday, saw a slight gain of 1.6% to $1,490.10, with most of its advance occurring the previous day. Dash DASH$58.48 was among the few CoinDesk 100 constituents to decline, falling by 0.53%, along with World Liberty Financial WLFI$0.05824, which dropped 0.31%.
- CoinMarketCap’s “Altcoin Season” index now stands at 44/100, having improved from Tuesday’s low of 32/100, reflecting a renewed speculative interest on Friday.