Bitcoin (BTC) and Ether (ETH) have recently faced significant challenges, plunging to multi-month lows of $93,400 and $3,050, respectively. This sell-off has confirmed a bearish trend characterized by a series of lower highs and lower lows across various timeframes. Investors are closely monitoring support levels, with BTC’s potential dip to $92,840 threatening to trigger $62 million in liquidations. Such a move could push prices down to around $87,500, a critical support level established in March.
The recent downturn has been influenced by a significant shift in expectations regarding the Federal Reserve’s interest rate policies. Currently, markets are pricing in a 50% chance of a rate cut by December. Lower interest rates generally benefit risk assets like cryptocurrencies because borrowing costs decrease, making the dollar less attractive for holding.
Derivatives Positioning
- Continuing capital flight from the crypto market is evident from the decline in open interest (OI) in futures tied to major tokens, including BTC and ETH, over the past 24 hours.
- Futures contracts on Zcash (ZEC) and Litecoin (LTC) have witnessed OI drops of over 6% and 10%, respectively.
- Meanwhile, XRP and ADA are the notable exceptions with slight OI increases of about 1% within the same timeframe.
- The BTC options market on Deribit shows a clear bias toward puts, indicating a bearish outlook, while short-term volatility has climbed to over an annualized 50%. ETH options also exhibit a similar gloomy sentiment.
- Popular trading strategies like the iron condor and strangle are dominating BTC’s block flows on Deribit, while ETH options data indicates that over 50% of the flow consists of call calendar spreads.
Token Talk
- The altcoin market has remained relatively subdued following a tumultuous sell-off that began on Friday and extended through the weekend.
- Although several larger tokens managed to stage slight recoveries on Sunday, they still predominantly reflect losses exceeding 10% over the past week.
- Last week’s price drawdown was exacerbated by a lack of liquidity, leading to exaggerated price moves downward. For instance, Solana (SOL) plummeted to a five-month low of $135, while Ether traded just above $3,000, reversing all gains accumulated since July.
- Furthermore, even privacy-focused coins have faltered. Zcash (ZEC), which had seen a remarkable rise from $41 to $670, has also cooled off.
- The liquidity crisis in the altcoin market is echoed by the fear and greed index, now reading “extreme fear” at a low 17/100, the least optimistic sentiment observed since April.
- According to CoinGlass’s average relative strength index (RSI), currently positioned at 43.52/100, the market doesn’t appear oversold yet, suggesting there may still be room for further declines.
