Liquidity Crunch Drives Bitcoin, Ether to Double-Digit Losses

The crypto market plunged towards April’s lows on Friday, with bitcoin BTC$84,634.24 and ether ETH$2,762.33 both dropping about 10% in 24 hours.

BTC was recently trading around $82,200 with ETH near $2,700. The altcoin market fared worse than the major cryptocurrencies as several tokens slumped as much as 20%. The CoinDesk 20 Index (CD20) fell 10% while the CoinDesk 80 Index of next-biggest tokens lost 12%, with all members in negative territory.

The sell-off was in part due to the liquidity crisis that spawned during October’s sell-off and liquidation event. Recent CoinDesk Research revealed that liquidity was still hollow follow the crash, paving the way to more violent price swings.

It wasn’t just crypto that felt the squeeze. U.S. equities have also been tumbling and the Nasdaq 100 now trades 9.4% below its Oct. 31 record high.

Derivatives Positioning

• Bitcoin’s 30-day implied volatility index, BVIV, has topped 64%, extending this month’s surge.
• The ether volatility index has jumped to 87%, the highest since April 10.
• Both moves indicate increasing uncertainty in the market and growing demand for options as spot prices slide.
• BTC’s open interest (OI) crashed to 700K BTC from 752K BTC in a day as the price slide shook out bullish leverage bets. According to one analyst, some traders are “knife catching” – or buying futures in a falling market, which is likened to catching a falling knife.
• OI has collapsed across the board in the past 24 hours, with DOGE, ENA, ASTER seeing drops in excess of 15%.
• On Deribit, BTC and ETH options continue to show a bias for put options.
• In BTC, put spreads account for 46% of the total block flow of the pat 24 hours with put diagonal spread at distant second. ETH flows display a similar profile.
• Some traders have picked up deep out-of-the-money IBIT puts at the $15 strike. (yes you read it right).

Token Talk

By Oliver Knight

• The altcoin market was dealt another brutal blow on Friday as several tokens slumped to multimonth lows.
• The Fear and Greed Index flashed 11/100, its lowest since CoinMarketCap began recording it in June 2023.
• INJ$5.2912, NEAR$1.8622, ETHFI$0.7770, APT$2.3413 and SUI$1.3731 all lost between 16% and 18% of their value over the past 24 hours as traders sold into an incredibly illiquid market.
• Bitcoin and ether weren’t immune, falling about 10% each, although the average crypto relative strength index (RSI) is currently in “oversold” territory, meaning the market may be due a relief rally.
• While the wider market was dealing with a bruising sell-off, a few traders managed to pocket millions of dollars by sniping base founder Jesse Pollak’s creator coin, JESSE. Two of the traders collectively made $1.3 million by purchasing the tokens in the same block the token was deployed, according to Arkham Intelligence.