Bitcoin, ether extend declines as leverage unwind accelerates: Crypto Markets Today

The crypto market selloff accelerated overnight with bitcoin BTC$82,692.63 and ether ETH$2,736.81 falling by a further 2.7% and 3.5%, respectively, since midnight UTC to compound Thursday's miserable session.

The drawdown comes alongside heavy losses for precious metals, with silver now trading at $96 following a 20% drop from Thursday's record high of $121. Gold is trading back below $5,000 after tumbling by 11% from Wednesday's $5,600 high.

U.S. equity index futures ticked lower while the dollar index (DXY) posted a 0.57% gain, buoyed by the expectation that Kevin Warsh looks set to become new the Federal Reserve chairman.

The global market rout, which saw bitcoin hit its lowest level since November, led to $1.8 billion in liquidations across crypto markets as leverage traders were caught off-guard by the precipitous fall despite a weak start to the year for crypto.

The bitcoin-dominant CoinDesk 20 Index (CD20) is now down by 6.6% since the turn of the year while the altcoin heavy CoinDesk 80 (CD80), outperforming its counterpart, has lost 2.28%.

Derivatives positioning

• The market swoon shook out leveraged crypto futures bets worth $1.8 billion in 24 hours. This represents massive wealth destruction over and above the decline in the market capitalization. Investor confidence dented by such losses typically takes time to rebuild.
• Open interest (OI) in futures tied to most major cryptocurrencies, including bitcoin and ether, has declined alongside large liquidations. DOGE stands out with a 2% increase in OI, which is reflective of traders shorting the dip. An uptick in OI alongside a drop in price is said to indicate that.
• Annualized perpetual funding rates for BTC, ETH, XRP and several other tokens have flipped negative, a sign of growing demand for downside bets.
• Bitcoin's 30-day implied volatility, as measured by Volmex's BVIV, jumped to 47% from 40%, indicating a rise in demand for options, or hedging contracts, in the wake of the price selloff. BVIV is not alone, Wall Street's equivalent, the VIX, also spiked Thursday.
• On Deribit, bitcoin and ether puts have become more pricier than calls, indicating a growing demand for downside protection.
• Block flows featured BTC put spreads, a bearish strategy. In ether's case, traders preferred a put butterfly, a market-neutral limited risk, limited reward play.

Token talk

• Layer-1 blockchain Canton's native token, CC, was the only top-100 cryptocurrency in the black over the past 24 hours as it managed to avoid a broader market selloff, rising by 3.35%.
• Privacy coins monero XMR$430.62, zcash ZEC$334.69 and dash DASH$51.03 all experienced heavy losses since midnight UTC, falling by roughly 5% as investor optimism around the sector begins to fade.
• Despite relative weakness across the market, bitcoin dominance dropped to 58.73% to suggest that investors are opting for speculative altcoin plays in an attempt to outperform the market.
• One of those speculative bets, RIVER, spectacularly unwound this week with it having lost 55% of its value since Monday, compounded by a 25% drop over the past 24 hours. RIVER's plight comes after an 884% rally between Jan. 1 and Jan. 26 as traders now begin to lock in profits.
• Friday was a volatile session for those trading tokenized silver on HyperLiquid, with CoinGlass data showing that one long position worth $47 million was liquidated in European hours after the metal fell to $96.