Bulls are taking a breather as risk aversion sweeps global markets over the past 24 hours, driving Bitcoin higher Back to $88,000.
Although the Federal Reserve’s decision to keep interest rates steady at 3.5%-3.75% is widely expected, rising geopolitical tensions and a shift to safe-haven assets have left cryptocurrency traders facing a sea of red.
There was a mix of optimism and pullback in major U.S. stock indexes, with the S&P 500 briefly topping 7,000 for the first time before retreating. These indexes are heavily influenced by this week’s biggest company earnings reports.
But in the cryptocurrency space, risk aversion has taken a serious hit. Bitcoin fell, with the broader CoinDesk 20 (CD20) index down 2.9%.
The exodus from cryptocurrencies caused gold prices to jump to all-time highs above $5,500 an ounce, dragging down gold-backed tokens such as The price rose as Tether itself and central banks actively accumulated the metal. Silver also extended gains to $117 an ounce.
Given that Bitcoin, and the broader cryptocurrency market, is more liquid for investors looking to exit the industry, it trades more like a liquidity-sensitive risk asset than a reliable hedging tool. The U.S. dollar index (DXY) fell to a four-year low this week, but investors don’t view the decline as a structural shift.
Derivatives Positioning
- Cumulative notional open interest across all cryptocurrency futures fell nearly 3% to $132.26 billion, signaling growing risk aversion.
- Cryptocurrency futures bets worth $348.3 million have been liquidated, marking a 13% increase in the number of liquidations in 24 hours. Most of these are bullish long strategies.
- Although Bitcoin and Ethereum prices fell following the Fed’s decision, their 30-day Implied Volatility Index remained near multi-month lows. This suggests traders continue to expect generally calm market conditions, rather than panic.
- Futures open interest related to HYPE fell by more than 12%, leading to capital outflows from major tokens such as Bitcoin, Ethereum, Solana and XRP.
- The annualized perpetual funding rate for the largest cryptocurrency is currently just above zero, unlike the 10% we saw earlier this week, indicating real bullish momentum. XLM’s funding rate has turned significantly negative, suggesting traders are leaning towards bearish or short bets.
- In the options market listed on Deribit, market sentiment remains cautious, with BTC and ETH put options still higher than call options. The bearish bias on Ethereum is relatively strong.
- Blockflow (large trades executed outside the public order book), features BTC call spreads and ETH put calendar spreads, both strategies designed to profit from low volatility and theta (time) decay.
token talk
- The Optimism community approved a 12-month plan to buy back OP tokens using revenue generated by its Ethereum layer 2 chain network.
- More than 84 percent of the votes cast supported the measure, which passed a quorum just before the deadline. If the final vote of the protocol’s Joint House reaches a 60% majority, the Optimism Foundation will convert ETH earned through sequencer fees into OP starting in February
- Hyperchain’s revenue last year was estimated at more than $17 million, half of which will be spent on monthly token purchases. Super chains include Coinbase’s Base and World Chain chains.
- Some critics argue that combining buybacks with token issuance negates any value returned to holders. The foundation countered that the buyback would help keep OP tokens in line with network growth while preserving funds for ecosystem development.
- OP’s price has fallen 80% in the past year and is currently trading below 29 cents, having fallen another 5% in the past 24 hours.