Bitcoin and leading cryptocurrencies decline as investors seek downside hedges.

Bitcoin continued its recent decline as derivatives data indicates a distinct risk-averse trend.

Key Points:

• Bitcoin has continued to decline and is currently stabilizing beneath $70,000 following last week’s significant drop.
• Derivatives data indicates a notable risk-off trend, with decreasing futures open interest, negative funding rates, high short positioning, and implied volatility suggesting strong demand for short-term downside protection.
• The RNBW token from crypto wallet Rainbow has fallen roughly 75% from its ICO price due to delays in distribution and infrastructure challenges.

Crypto markets began the week under strain, extending losses after a tumultuous weekend as bitcoin BTC$70,411.45 exhibited tentative signs of stabilizing below the $70,000 mark.

Despite the largest cryptocurrency declining by over 2.8% in the past 24 hours, it remains significantly above its recent lows near $60,000. However, it has struggled to regain its upward momentum following the sharp decline from last week, which has revived discussions on whether the market has entered a more profound bear phase or is approaching a bottom.

STORY CONTINUES BELOWStay informed with the latest updates.Subscribe to the Crypto Daybook Americas Newsletter today. See all newslettersSign me upBy signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy.

Bitcoin proponents suggested that the slowing of downward movements indicates exhaustion, although detractors celebrated the declines. Nonetheless, focus is shifting toward software stocks, some of which have begun to recover as fears of a more severe downturn ease.

The CoinDesk 5 Index (CD5) decreased by 3.4%, with all five of the largest cryptocurrencies experiencing declines. Ether ETH$2,063.57 fell approximately 5%, underperforming bitcoin as traders reduced risk across major tokens, yet it maintained a position above the psychological support level of $2,000. The broader CoinDesk 20 (CD20) index is down 3.7%.

Derivatives Positioning

• BTC futures are exhibiting a distinct bearish trend as open interest (OI) has decreased from $19 billion to $16 billion over the preceding week, indicating a phase of ongoing deleveraging.
• Funding rates on Bybit (-2.24%) and Binance (-0.5%) have transitioned from neutral to negative, indicating that short sellers are currently shaping the market narrative. With the three-month basis compressing to 3%, institutional interest has diminished, reflecting a broader derivatives environment characterized by risk-off sentiment.
• Options data corroborates this defensive trend, with the one-week 25-delta skew for BTC increasing to 20% and call dominance dropping to 48%.
• The implied volatility (IV) term structure is currently in extreme backwardation, with front-end volatility at 85.03%, significantly exceeding long-term expectations (~50%). This indicates a substantial premium for immediate protection against short-term price declines.
• Coinglass data indicates $397 million in liquidations over 24 hours, with a 45-55 split favoring longs and shorts. BTC ($234 million), ETH ($74 million), and SOL ($14 million) led in terms of notional liquidations.
• The Binance liquidation heatmap highlights $68,160 as a critical liquidation level to watch for potential price drops.

Token Talk

• Crypto wallet Rainbow launched its RNBW token last week, but the rollout faced challenges.
• The Ethereum-based project introduced the token on the layer 2 network Base, with the price plummeting to $0.025, representing a 75% decrease from its $0.10 initial coin offering (ICO) just two months prior. It has since recovered to $0.031.
• This decline erased expectations from speculators who had anticipated a $100 million fully diluted valuation (FDV). On Polymarket, the odds of that prediction reached nearly 80% earlier this year. The FDV is now closer to $31 million.
• The turmoil stemmed from delays in token distribution to initial buyers and participants in Rainbow’s onchain rewards program, with some users reporting they had not received their airdropped tokens hours after the launch.
• Rainbow’s cofounder Mike Demarais attributed the issues to backend infrastructure unable to handle the demand. U.S.-based investors will not have full access to their tokens until December 2026, according to the vesting schedule.
• Rainbow secured $18 million in a 2022 Series A funding round led by Reddit cofounder Alexis Ohanian’s firm, Seven Seven Six. The wallet is recognized for its gamified features and a points system linked to the RNBW token.