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Major cryptocurrencies retreated from their overnight peaks during Asian trading, with bitcoin remaining stable above a crucial support level, despite a prevailing bearish investor sentiment.
Fear grips crypto market (Patrick Hendry/Unsplash)
What to know:
- Bitcoin and ether remained above support levels during Asian trading. The larger cryptocurrency market displayed weakness, even as equities and precious metals experienced gains.
- Investor sentiment continues to be extremely pessimistic, with the Fear and Greed index registering at 17/100, as some analysts caution that the market’s structural downside risks are yet to be addressed.
- Altcoins experienced a significant rebound, with HYPE surging over 70% within a week. POL, LIT, and MORPHO also saw gains, while privacy coins such as XMR and ZEC continued their downward trends.
The cryptocurrency market stayed above a pivotal support price level during Asian trading hours, with bitcoin trading at $78,400 and ether priced at $2,290.
Since midnight UTC, several major cryptocurrencies have retraced some of their gains, while precious metals and U.S. stocks rallied, highlighting a relative weakness in the crypto sector.
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The Fear and Greed index stands at 17/100, indicating “extreme fear,” as investors begin to acknowledge that the highs experienced in October marked the peak of the bull market, followed by a correction that indeed represents a transition to a bear market.
While some analysts predict a brief bear market with bitcoin nearing a significant price floor at $60,000, a CryptoQuant analyst remarked that the market is structurally weakening and that downside risks are still not resolved.
The one exception to the bearish outlook is HyperLiquid’s HYPE token, which has surged over 70% in the past week, driven by a spike in volume in its silver futures market, indicating increased participation from retail traders.
Derivatives positioning
- Bitcoin’s annualized 30-day implied volatility remains above its 200-day simple moving average, suggesting potential for further price volatility ahead. The same applies to ether.
- Exchanges have liquidated over $300 million in leveraged crypto futures positions in the past 24 hours. Nevertheless, the notional open interest (OI) in crypto futures has stabilized at several-month lows close to $110 billion.
- In the last 24 hours, futures OI in leading coins, including BTC, ETH, SOL, and XRP, has decreased. HYPE futures, however, have seen a notable increase of nearly 20% in open interest. This discrepancy indicates capital deployment likely on the bullish side, anticipating further gains for the token.
- Annualized perpetual funding rates for major cryptocurrencies remain slightly positive, indicating a subdued bullish sentiment.
- On Deribit, the premiums for BTC and ETH puts have weakened slightly since Monday. However, puts remain more expensive across various expiries, reflecting lingering downside expectations.
- Block flows demonstrated demand for bitcoin strangles, a volatility strategy, along with ether risk reversals, which represent a low-cost hedging approach.
Token talk
- HyperLiquid’s HYPE advanced, a rise attributed to increasing volumes and revenue, while much of the wider altcoin market also saw a rebound on Tuesday. Polygon’s POL token, as well as LIT and MORPHO, recorded gains of up to 13% over the past 24 hours.
- These gains follow a low-liquidity weekend selloff that pushed several assets into “oversold” conditions. In a low-liquidity setting, where market depth is limited, altcoins often experience exaggerated movements as the demand for instant buy or sell orders cannot be satisfied by resting bids and asks on the order book.
- Privacy coins monero and zcash struggled to maintain their strong starts to the year. Both have declined by over 20% in the past week, with an additional 3.5% selloff since midnight.
- Another asset that has withstood recent selling pressure is layer-1 blockchain Canton’s CC token, which increased by 28% over the last week due to interest from institutional investors.
- The Canton chain is a privacy-enabled blockchain designed for institutional finance and real-world asset (RWA) tokenization. In December, it was announced that Wall Street giant DTCC had reached an agreement with Canton to tokenize U.S. Treasury securities on the blockchain.
