The cryptocurrency market experienced a significant downturn on Tuesday, losing momentum gained earlier in the week and eroding previous gains. Bitcoin, which began trading at $90,658.60, has dropped to $90,150, marking a decline from Monday’s peak of $92,350. The CoinDesk 20 Index (CD20) reflected this trend, falling 2.1% over the past 24 hours, with all its constituents experiencing declines.
This price action resembles the previous week’s pattern, where Bitcoin initially surged from $86,300 to $93,200 between Sunday and Tuesday, only to retreat to $88,000 during the latter part of the week. The current week’s dynamics are influenced by an anticipated Federal Reserve interest rate decision on Wednesday, with the market largely predicting a 25 basis-point cut. Generally, such reductions are viewed as favorable for risk assets like cryptocurrencies because they decrease the relative value of the dollar.
However, the extended speculation around a potential rate cut might mean this outcome has already been priced into the market. If that is the case, risk assets may experience a sell-off following the announcement, signaling a lack of further bullish catalysts for the remaining year.
In terms of derivatives positioning, the market shows no signs of anxiety leading up to the Fed meeting, with BTC and ETH displaying steady 30-day implied volatility indexes, BVIV and EVIV. Activity on Deribit indicates interest in June expiry puts at striking prices as low as $20,000 and calls exceeding $200,000. This activity suggests a focus on bullish volatility rather than directional price trades. Notably, put options for both BTC and ETH remain more expensive than call options, with notable block flows indicating risk reversals and put diagonal spreads in Bitcoin. In Ethereum’s case, the activity has featured call spreads and risk reversals, while major tokens, including Bitcoin and Ethereum, have shown declining open interest in futures. For Bitcoin Cash (BCH), open interest dropped by 8%, while Zcash (ZEC) saw a slight increase of 16%, nearing its previous record high.
The altcoin market continues to experience a downturn, with several tokens lagging behind Bitcoin as investor interest in speculative assets reaches cycle lows. Tokens like HYPE have fallen 8.6% in 24 hours, while others, including STRK, QNT, and KAS, are down between 5.7% and 6.3%. CoinMarketCap’s “altcoin season” indicator also reflects this trend, currently sitting at 18 out of 100, a stark contrast to its peak of 78 on September 20.
Over the past 90 days, Bitcoin has faced a 20% decline, which is minor compared to the altcoin sector, where over half of the top 100 tokens by market capitalization have dipped more than 40%. Among the underperformers are FET, an AI-focused token grappling with internal disputes, and TIA, which has fallen 67% in 90 days due to layoffs and inactivity on the blockchain.
Conversely, a few tokens have managed to perform relatively well amidst the broader market decline. Privacy coins, including Zcash and Dash, have shown resilience, as have BNB and Bitcoin Cash, which have maintained a fairly stable status despite unfavorable conditions in the market.
