Market Watch: Leading cryptocurrencies retreat, with derivatives signaling potential risks

Crypto Markets Retreat as Fed Holds Rates and Risk-Off Sentiment Hits

Despite the Federal Reserve’s widely expected decision to keep interest rates at 3.5%-3.75%, rising geopolitical tensions and a rotation into safe-haven assets sent crypto markets lower.

Bitcoin BTC $82,550.64 slipped back toward $88,000 over the past 24 hours. U.S. stocks showed mixed performance, with the S&P 500 briefly topping 7,000 before retreating amid major earnings reports.

Crypto was hit harder, with the CoinDesk 20 (CD20) index falling 2.9%. Gold surged past $5,500 an ounce, boosting gold-backed tokens like XAUT $4,897.90, while silver rose to $117. Bitcoin continues to behave more like a liquidity-sensitive risk asset than a hedge, even as the U.S. Dollar Index (DXY) fell to a four-year low.

Derivatives and Market Signals

• Total crypto futures open interest dropped nearly 3% to $132.26 billion.
• $348.3 million in futures liquidations occurred, mostly long positions.
• BTC and ETH 30-day implied volatility remains near multimonth lows, suggesting calmer conditions.
• Perpetual funding rates for major tokens are near zero, with XLM turning negative, reflecting bearish sentiment.
• Options markets show BTC and ETH puts trading at a premium to calls, with ether showing stronger put bias.

Token Updates

• Optimism approved a 12-month plan to buy back OP tokens using network revenue, with over 84% of votes supporting the measure. Pending final approval, ETH from sequencer fees will be converted into OP starting February.
• Half of the Superchain’s $17 million revenue last year will fund monthly token purchases. The Superchain includes chains like Coinbase’s Base and World Chain.
• OP has dropped 80% over the past year and another 5% in the last 24 hours, trading below 29 cents.