Bitcoin held above a key support level on Wednesday as capital began to flow into speculative altcoin plays.
BTC is roughly where it was this time on Tuesday as several altcoins, including outperformed with an increase of 28%.
A breakdown of Bitcoin’s $88,000 support level, coupled with a low liquidity trading environment, will likely drag down the entire crypto market, including altcoins.
For now, several tokens are holding relief rallies after a devastating week in which $400 billion in crypto market cap disappeared in a wave of selling pressure.
Positioning of derivative products
- Open interest (OI) for futures contracts tied to most major tokens, including BTC and ETH, continues to decline, a sign of persistent capital outflows. This reflects a loss of confidence among traders, which usually takes time to recover.
- BCH and LINK stand out with OI up more than 2% in the last 24 hours.
- Annualized zcash funding rates perpetuals continue to hover at -50%, implying a strong bias towards bearish short positions. Traders appear to be bracing for a price correction following the several hundred percent rally since early September.
- Funding rates for most major cryptocurrencies remain slightly positive, implying a cautious bias towards bullish.
- On Deribit, the BTC open interest spread has turned decisively bearish, with the $85,000 put being the most popular play. A few weeks ago, it was the $140,000 call.
- Short-term volatility remains high with continued demand for puts on BTC and ETH.
- Call diagonal schedule spreads and strangles were the most used strategies by Bitcoin block traders. In the case of ETH, traders looked for call spreads and straddles.
Symbolic discussion
- The altcoin market gave crypto traders a glimmer of hope on Wednesday with tokens such as AAVE, CRO and INJ all posting 24-hour gains of between 2% and 6%.
- The rally follows five days of bearish price action, compounded by wave after wave of selling pressure.
- The Coin Desk 10 index, excluding bitcoin, is slightly in the green over the last 24 hours, even if it remains down 19.5% over one month.
- The Fear and Greed Index continues to show “extreme fear” at 16/100, indicating that from a sentiment perspective, the market may see a continued rebound.
- The direction will depend on whether bitcoin, the market anchor, can dig itself out of trouble by returning to around $98,000.
- Ether is trading at $3,095 after outperforming its Bitcoin trading pair with a 1% gain.
- Bitcoin’s dominance has fallen from 60% on November 4 to 58%, showing traders’ preference for altcoins as the market decides its next move.
- posted a daily gain of 28% on Wednesday as it consolidates itself as an outlier, rising due to a surge in deposits into its BTCFi initiative, which has now locked up over 650 BTC ($72 million) and 900 million STRK (20% of supply), limiting supply on exchanges.
