Bitcoin and ether decline by 7% as market anxiety rises and liquidations increase.

Cryptocurrency markets continued to decline amid significant derivatives liquidations and macroeconomic challenges, with traders preparing for additional losses if bitcoin breaches critical support levels.

(TheDigitalArtist/Pixabay, modified by CoinDesk)

Key points:

• The Fear and Greed index for cryptocurrency dipped to 11, marking the lowest point of the year, as BTC and ETH declined by over 7% and altcoins followed suit.
• In just 24 hours, more than $800 million in leveraged positions were liquidated, open interest dropped to $103 billion, and options markets displayed extreme fear with puts trading at significantly higher prices than calls.
• Heightened oil volatility linked to tensions between the U.S. and Iran, as well as a general risk-off sentiment, are impacting higher-beta assets, with analysts cautioning that a drop below $70,000 could lead to further selling pressure.

Bitcoin BTC$71,091.27 and ether ETH$2,088.94 furthered their declines over the last 24 hours, each falling by more than 7% as bearish sentiment dominated the market.

The Fear and Greed index decreased to 11.00, its lowest this year, signaling extreme bearish sentiment.

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"Bitcoin has returned to a price level that acted as strong resistance from March to October 2024. This explains the current interest from bargain hunters," Alex Kupsikevich, chief market analyst at The FxPro, stated in an email to CoinDesk.

"If we examine a comparable phase in the market cycle, a similarly pronounced sell-off in May 2022 concluded with price stabilization around a single level for a month, followed by a more significant drop," he added.

The chief market analyst at Bitget remarked that the selling of derivatives and leveraged positions intensified declines across the board, compressing price movements. Macroeconomic factors and sentiment challenges, including risk-averse responses to geopolitical conflicts and interest-rate uncertainty, have diminished interest in high-beta assets like XRP, he noted.

In traditional markets, oil price volatility remained high, reflecting a potential escalation in tensions between the U.S. and Iran. An increase in oil prices could contribute to global inflationary pressures, complicating the situation for crypto advocates.

Derivatives positioning

• The crypto futures market continued to experience capital outflows as cumulative notional open interest fell to $103 billion, and leveraged positions were forced to close due to margin constraints.
• Over $800 million in leveraged positions were liquidated by centralized exchanges within the last 24 hours, with the figure likely to rise significantly as BTC has just fallen below the crucial support level of $70,000.
• Notwithstanding the liquidations, 90-day bitcoin futures are still trading at a premium compared to the spot price. Typically, bear markets reach a bottom when this premium disappears.
• Open interest (OI) in specific tokens such as XAUT$4,877.83, link LINK$9.1346, TRX$0.2803 and PEPE (PEPE) has increased.
• Annualized perpetual funding rates for various altcoins flipped to negative, indicating a greater demand for bearish strategies, which is characteristic of a downtrend.
• On Deribit, options are reflecting extreme fear, with short-term puts for bitcoin and ether trading at a premium of over 10 points compared to calls.
• Bearish strategies, such as put spreads, continue to dominate the bitcoin block flows. Block trades consist of large positions negotiated privately over the counter.

Token talk

• The altcoin market broadly mirrored bitcoin’s performance during Asian and European trading hours, with significant declines in privacy coins monero XMR$362.51 and zcash ZEC$247.56, both experiencing declines of up to 7%.
• XRP decreased by over 10% overnight, impacted by $30 million in liquidations. The sharp drop accelerated at 09:00 UTC as prices fell from $1.44 to $1.35.
• The sole exception in the altcoin market was the derivatives exchange token MYX, which gained 4% in the past 24 hours, contributing to a year-to-date increase of 56%.
• The bitcoin-heavy CoinDesk 20 (CD20) Index experienced an 8.34% loss in the last 24 hours, underperforming the altcoin-focused CoinDesk 80 (CD80), which fell by 5.92%.
• Numerous altcoins are now displaying characteristics of a significant downtrend, marked by a series of lower lows and lower highs not observed since the bear market of 2022.