Crypto Markets Today: Warning Signals as Bitcoin's Strongest Month of the Year Approaches

Bitcoin (BTC) is rising as the start of October, historically its best month of the year, approaches. Ether (ETH) is also in the green over the past 24 hours, as are the other 18 members of the CoinDesk 20 Index, which has gained 3.0%.

Still, there are reasons to be wary. In the derivatives market, futures are showing a shift away from a bullish stance while options are sending out mixed messages.

Exchange-traded funds are leaking, with both spot bitcoin ETFs and ether ETFs in the U.S. notching net outflows on Friday. For the ETH ETFs, that's a fifth straight day of withdrawals, the longest streak since Sept. 8.

Another warning sign is the CME futures gap — the difference the between bitcoin's price when the CME futures market closes on Friday and when it reopens on Sunday — which is below the current levels. Futures gaps tend to be filled.

Derivatives Positioning

by Jacob Joseph

• Overall BTC futures open interest has dropped to roughly $29 billion from a recent high of $32 billion, indicating that traders are reducing their exposure.
• At the same time, the three-month annualized basis remains compressed at around 6%, making the basis trade less profitable.
• In essence, the market is showing a clear shift from a bullish bias as traders unwind their long positions and a growing number of shorts enter the market.
• In options, the BTC Implied Volatility Term Structure shows an upward-sloping curve while the 25 delta skew for short-term options (1-week, 1-month) has increased, suggesting that some traders are paying a premium for calls over puts, indicating a bullish bias.
• This is directly contradicted by the 24-hour put-call volume, which shows puts dominating with 58.43% of contracts traded, a sign that a large number of traders are still seeking downside protection.
• The divergence suggests a highly polarized market where some are betting on a short-term rally while others are actively hedging against further declines, leading to a state of indecision and mixed sentiment.
• BTC funding rates have recently turned negative, suggesting a growing bearish sentiment. After holding steady for most of the week, the annualized funding rate on Hyperliquid dropped significantly to a negative -6%. This indicates a strong conviction from traders who are shorting BTC on that platform.
• Meanwhile, funding rates on major venues like Binance and OKX remain near neutral. The overall trend, particularly the sharp drop on Hyperliquid, suggests that traders are actively taking risk off the table and positioning for a decline in BTC prices.
• Coinglass data shows $350 million in 24 hour liquidations, with a 24-76 split between longs and shorts. ETH ($130 million), BTC ($52 million) and SOL ($37 million) were the leaders in terms of notional liquidations. Binance's liquidation heatmap indicates $113,000 as a core liquidation level to monitor, in case of a price rise.

Token Talk

By Oliver Knight

• Plasma’s native token, XPL, is beginning to cool off following its red-hot trading debut. The Tether-backed token is changing hands at $1.29, down 12% over the past 24 hours, as daily trading volume slipped 9% to $2.3 billion.
• On-chain activity, however, tells a different story, with deposits rising 13.7% to $5.5 billion in the same period. Much of that capital is flowing into yield-generating products like Plasma Saving Vaults, which currently offer around 20% annualized returns on lending vaults.
• The combination of attractive yields and rapid inflows has helped Plasma quickly climb the blockchain rankings, already overtaking Coinbase-backed Base in terms of total value locked, according to data from DeFiLlama.
• While trading activity for XPL has cooled, inflows suggest strong investor appetite during a relative lull in the wider crypto markets as assets like BTC and ETH fell back to respective levels of support at the tail end of last week.
• It remains to be seen how well Plasma and its protocols fare during a bullish market phase, but the stablecoin-focused blockchain has already earned its fruits when the market is under pressure.