The crypto market experienced a significant downturn on Friday, as Bitcoin and Ether faced sharp losses that mirrored the struggling liquidity conditions. Bitcoin traded around $82,200, while Ether hovered near $2,700, both falling by approximately 10% within a 24-hour span. The decline was more pronounced in the altcoin market, where several tokens plummeted by up to 20%.
Market Overview
The CoinDesk 20 Index (CD20) saw a decline of 10%, while the broader CoinDesk 80 Index dropped by 12%. Every token listed within these indexes recorded negative returns. This sell-off was heavily influenced by a liquidity crisis that originated from a previous crash.
Impact on Liquidity and Volatility
Recent research highlighted that market liquidity remains thin following the sell-off, leading to escalated price volatility. U.S. equities are also feeling the heat, with the Nasdaq 100 down 9.4% from its record high on October 31.
- Bitcoin (BTC): 30-day implied volatility index (BVIV) exceeded 64% this month.
- Ether (ETH): Volatility index surged to 87%, the highest level since April 10.
- Open Interest (OI): BTC OI fell dramatically from 752K BTC to 700K BTC due to bearish market movements.
Many traders are attempting to capitalize on falling prices, a strategy known as “knife catching.” OI has diminished significantly across various cryptocurrencies, especially DOGE, ENA, and ASTER, which dropped over 15% in the last day.
Options Market Insights
On the Deribit exchange, BTC and ETH options indicate a strong preference for put options. Recent data reveals that put spreads made up 46% of total block flow for BTC over the last 24 hours, while ETH reflected a similar trend.
Altcoin Market Slump
Friday marked another challenging day for the altcoin market, with tokens such as INJ, NEAR, ETHFI, APT, and SUI recording losses ranging from 16% to 18%. The Fear and Greed Index reached a stark low of 11 out of 100, the lowest since its tracking began in June 2023.
Despite the overall market downturn, some traders capitalized on opportunities by investing in lesser-known coins. Two traders reportedly earned $1.3 million by purchasing JESSE tokens at inception, demonstrating potential profitability even amid adverse market conditions.
