Bitcoin defends key support as traders slide into ‘extreme fear’

Major cryptocurrencies pulled back from overnight highs during Asia trading, with bitcoin holding above a key support level even as investor sentiment remains deeply bearish.

During Asian hours, the broader crypto market stayed above critical price floors, with bitcoin trading around $78,400 and ether near $2,290. Despite the stability, momentum faded after midnight UTC as major tokens surrendered part of their earlier gains.

While U.S. equities and precious metals rallied, crypto underperformed, underscoring relative weakness across the digital asset space. Investor sentiment remains strained, with the Fear and Greed Index at 17 out of 100 — firmly in “extreme fear” territory — as traders increasingly accept the view that October’s highs marked the peak of the bull cycle and that the subsequent decline represents a shift into a bear market.

Some analysts argue the downturn may be short-lived, pointing to bitcoin approaching a potential price floor near $60,000. Others remain more cautious. A CryptoQuant analyst said market structure continues to weaken, leaving downside risks unresolved.

One notable exception to the prevailing gloom is HyperLiquid’s HYPE token, which has surged more than 70% over the past week. The rally coincides with a sharp increase in trading volume in HyperLiquid’s silver futures market, suggesting heightened retail participation.

Derivatives positioning

Bitcoin’s annualized 30-day implied volatility remains above its 200-day simple moving average, signaling the potential for further price turbulence. Ether shows a similar volatility profile.

More than $300 million in leveraged crypto futures positions were liquidated over the past 24 hours, though notional open interest across crypto futures has stabilized near multi-month lows around $110 billion.

Open interest in futures tied to major tokens including BTC, ETH, SOL, and XRP declined over the past day. In contrast, HYPE futures saw open interest jump nearly 20%, suggesting fresh capital deployment, likely on the bullish side.

Perpetual futures funding rates for major cryptocurrencies remain slightly positive, pointing to a muted bullish bias. On Deribit, put option premiums for bitcoin and ether eased modestly from Monday’s levels, though puts remain more expensive across multiple expiries, reflecting persistent downside protection demand.

Block trading activity showed interest in bitcoin strangles — a volatility-focused strategy — and ether risk reversals, commonly used as low-cost hedges.

Token moves

HYPE continued to outperform, supported by rising volumes and revenue, while parts of the broader altcoin market rebounded on Tuesday. Polygon’s POL token, along with LIT and MORPHO, posted gains of up to 13% over the past 24 hours.

The rebound followed a low-liquidity weekend selloff that pushed several assets into oversold territory. In thin markets, limited order book depth can amplify price swings, particularly for altcoins.

Not all segments participated in the recovery. Privacy-focused tokens Monero (XMR) and Zcash (ZEC) failed to extend their strong starts to the year, falling more than 20% over the past week and an additional 3.5% since midnight.

Another relative standout has been Canton’s CC token, which climbed 28% over the past week amid growing institutional interest. Canton is a privacy-enabled layer-1 blockchain designed for institutional finance and real-world asset tokenization. In December, Wall Street infrastructure firm DTCC announced a partnership with Canton to tokenize U.S. Treasury securities on the network.

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