Bitcoin and Ether Slide as Liquidity Shortages Trigger Broad Crypto Sell-Off

Crypto markets tumbled toward April lows on Friday as a lingering liquidity crunch amplified price swings. Bitcoin (BTC $87,058.50) and Ether (ETH $2,934.13) each fell roughly 10% over 24 hours. BTC traded near $82,200, while ETH dipped toward $2,700.

The altcoin market was hit even harder, with several tokens sliding as much as 20%. The CoinDesk 20 Index (CD20) fell 10%, while the CoinDesk 80 Index, covering next-largest tokens, dropped 12%, leaving all constituents in negative territory.

Liquidity Crunch Drives Volatility

The sell-off is partly due to the liquidity shortage that emerged during October’s market-wide liquidation event. CoinDesk Research noted that liquidity remains thin, making the market vulnerable to sharper swings.

Crypto was not alone in feeling the pressure: U.S. equities also declined, with the Nasdaq 100 now trading 9.4% below its October 31 record high.

Derivatives and Options Flow

• Bitcoin’s 30-day implied volatility (BVIV) climbed above 64%, while Ether’s volatility index surged to 87%, its highest since April 10.
• The sharp moves reflect mounting market uncertainty and heightened demand for options amid falling spot prices.
• Bitcoin’s open interest (OI) dropped to 700K BTC from 752K BTC, as leveraged bullish positions were liquidated. Analysts note some traders are attempting to “catch the falling knife” by buying futures in a declining market.
• OI across altcoins also fell, with DOGE, ENA, and ASTER seeing declines over 15%.
• On Deribit, BTC and ETH options show a clear bias toward puts, with 46% of BTC block flow accounted for by put spreads. ETH displays a similar profile. Some traders even bought deep out-of-the-money IBIT puts at the $15 strike.

Altcoin Market and Sentiment

Altcoins faced steep declines, with many tokens hitting multimonth lows. The Crypto Fear & Greed Index fell to 11/100, the lowest since June 2023.

Bitcoin and Ether were not immune, each falling roughly 10%, though the average crypto RSI has entered oversold territory, potentially setting the stage for a relief rally.

Despite the overall market weakness, some traders found opportunities. Two traders collectively earned $1.3 million by sniping Jesse Pollak’s creator coin, JESSE, purchasing tokens in the same block as their deployment, according to Arkham Intelligence.

About The Author

ctleditor

See author's posts