Crypto relief rally fails to shake persistent bearish derivatives signal

The crypto market showed signs of resilience on Thursday, with bitcoin $BTC$61,111.67 adding 1.1% since midnight UTC after dipping below $60,000 on Wednesday to its lowest since October 2024.

The largest cryptocurrency remains at a critical level in terms of broader market structure. A potential break lower in price could trigger a slide to around $52,000. For now, it appears to have weathered the storm.

Ether ($ETH) rose 1.5% on Thursday and was recently trading at $1,644 after briefly tumbling to $1,550 at around 17:00 UTC on Wednesday.

Thursday's gains can possibly be linked to a recovery in U.S. equities. S&P 500 and Nasdaq 100 futures are 0.7% and 2.2% higher, respectively.

Derivatives positioning

• $BTC revisited lows near $59,000 on Wednesday and has since bounced back to over $61,000.
• The two-way volatility has proven costly for leveraged futures bets across the market. Centralized exchanges liquidated nearly $1 billion in crypto futures positions within 24 hours, with longs accounting for the largest portion.
• Still, bitcoin's futures open interest (OI) has jumped to 763K $BTC, the most since June 4, ending a stretch of steadiness around 730K $BTC. In other words, the price drop has triggered an inflow of money, but not necessarily on the bullish side. In fact, annualized funding rates have flipped negative, a sign of traders paying a premium for downside exposure.
• The ether futures market hasn't seen any notable increase in OI, and funding rates remain slightly positive.
• $SOL's OI remains near Wednesday's record high, alongside largely neutral funding rates that point to balanced positioning in the market. The same is true for XRP, whose OI is hovering at its highest levels since October.
• The OI-normalized, 24-hour cumulative volume delta for most coins, including $BTC, is negative for a third straight day. That's a sign bears are leading the price action by shorting at market prices rather than using passive limit orders.
• BVIV, which measures the 30-day implied volatility in $BTC, has pulled back to 46% a high of 51%. This decline in the so-called "fear gauge," representing demand for options, supports the cryptocurrency's overnight rebound. The same is true for ether's implied volatility index, EVIV.
• Still, ether is seen as more volatile than $BTC, with implied volatilities richer by 10 points or more compared with bitcoin's across all timeframes.
• Option skews for the two largest cryptocurrencies indicate downside concerns that are both persistent and strengthening . For instance, $BTC's one-week skew shows a nearly 25-point volatility premium for puts. This also means upside bets are currently cheap and could draw strong demand should Thursday's U.S. Core PCE for May reveal a slowdown in inflation.

Token talk

• The altcoin market posted an exaggerated bounce on Thursday after losses on Wednesday, a reflection of a low-liquidity environment.
• Jupiter (JUP) fell by more than 12% in six hours on Wednesday before bouncing by more than 18%, liquidating futures traders in both directions.
• Coinglass data shows that $1 billion in futures positions were liquidated in the past 24 hours, with $585 million of that being attributed to altcoin trading pairs.
• Decentralized finance (DeFi) tokens AAVE and ETHFI also performed well on Thursday, rising by 2.5% and 4.7%, respectively, since midnight.
• AI tokens, meanwhile, struggled to recover. RENDER and NEAR posted losses of between 0.8% and 1.9% despite a bounce across other crypto sectors.
• Layer-1 network token solana ($SOL) tumbled to $64 on Wednesday to complete a 75% slide since September. A break below June 6's low of $60 would mark its lowest point since December 2023.