Memecoins drive cryptocurrency market increases while major tokens remain stagnant.

Bitcoin remained relatively stable on Tuesday, while ether saw a decline. CoinDesk’s memecoin Index experienced an increase.

Sam Altman (Sebastian Gollnow /CC modified by CoinDesk)

Key Points:

• Bitcoin is finding it challenging to exceed $70,000 as altcoins, especially memecoins and AI-related tokens like Worldcoin and Virtuals, perform better despite ongoing “extreme fear” in crypto market sentiment indicators.
• Futures data indicates significant deleveraging and notably negative funding rates on major exchanges, while options markets suggest a potential stabilization of long-term volatility expectations.
• Merkle Trade, a decentralized exchange for perpetual futures on the Aptos blockchain, is set to close down less than two years after a $2.1 million funding round.

Bitcoin BTC$68,747.00 is having difficulty maintaining a position above $70,000 as altcoins show stronger performance.

The leading cryptocurrency has shown little variation over the last 24 hours, while the broader CoinDesk 20 (CD20) index increased by 0.40%, even as ether ETH$2,011.12 saw a decline. Memecoins are leading the upward movement, with the CoinDesk Memecoin Index (CDMEME) increasing by 1.5% as PIPPIN surged by 46%.

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Tokens associated with artificial intelligence (AI) also performed well. WLD$0.3873, co-founded by OpenAI CEO Sam Altman, increased by over 3% during the past day, while Virtuals’ VIRTUAL token gained 2.4%. This occurs as the narrative surrounding “agentic AI,” where AI tools now also perform tasks, expands.

Nonetheless, the crypto Fear and Greed Index still indicates “extreme fear” within the market following last week’s selloff.

In traditional markets, stability has been observed, partly supported by Prime Minister Sanae Takaichi’s significant election victory in Japan. While Japanese bond yields rose following the election results, they have since reverted to near pre-election levels. This mitigates the risk of trillions in overseas investments returning to Japan in search of higher yields.

Derivatives Positioning

• Bearish trends in BTC futures are strengthening as open interest (OI) continues to decline to $15.9 billion, indicating a deep and extended deleveraging phase.
• This change is particularly apparent in the funding rates on Binance (-7%) and Bybit (-8%), which have plunged into markedly negative territory. This indicates that short sellers are incurring substantial costs to maintain their positions. With the three-month basis remaining at 3%, institutional interest stays on the sidelines.
• The BTC options market reflects a reduction in extreme defensive sentiment. The one-week 25-delta skew is at 16%, while call options have regained a presence at 56%, suggesting a pivot towards bottom-fishing strategies.
• The implied volatility (IV) term structure is shifting from extreme backwardation to a hybrid state that indicates that while short-term protection remains costly, long-term volatility expectations are stabilizing.
• Coinglass data shows $290 million in liquidations over 24 hours, with a split of 53-47 between longs and shorts. BTC ($114 million), ETH ($89 million), and others ($16 million) led in notional liquidations. Binance’s liquidation heatmap highlights $68,160 as a key liquidation level to watch for potential price drops.

Token Talk

• Merkle Trade, the largest decentralized exchange for perpetual futures on the Aptos blockchain, is in the process of shutting down. The exchange disabled new trading positions on Friday and will forcibly close all open positions today.
• Merkle’s native token, MKL, has risen by 9% in the last 24 hours. It remains redeemable without withdrawal fees, with a final staking rewards payment scheduled for February 12. The token has experienced a 77% decline over the past year.
• This decision comes less than two years after Merkle secured $2.1 million in a seed funding round supported by Aptos Labs, Hashed, and Arrington Capital.
• Despite recording $30 billion in trading volume since its launch in 2023, the team provided no specific reason for the closure in a recent post on X, merely stating that the choice followed “careful consideration.”