The crypto market has proven its resilience by outperforming traditional assets such as equities in recent weeks. This can be attributed to a significant repricing in monetary policy expectations and short futures liquidations. However, this outperformance faced limitations due to stronger-than-expected US jobs data, which dampened the recent rally. The reversal in US Treasury yields and decrease in overall risk appetite across traditional financial markets impacted the short-term performance of crypto assets.
During this period, altcoins, particularly Avalanche (AVAX) and Cardano (ADA), gained significant momentum, with each returning over 50%. Among the top 10 crypto assets, Avalanche, Cardano, and Polkadot (DOT) stood out as the relative outperformers. This surge in altcoin outperformance compared to Bitcoin (BTC) indicates a “high-risk appetite” within the crypto market.
On-chain data for Bitcoin suggests that investors are increasingly taking profits, as evidenced by the rising number of coins in profit being sent to exchanges. ETC Group’s in-house Crypto Asset Sentiment Index remained relatively elevated, indicating positive market sentiment. However, major reversals were observed in the Crypto Dispersion Index and the BTC 25-delta 1-month option skew.
The Crypto Fear & Greed Index continues to reside in “Greed” territory, reflecting ongoing market optimism. While ETC Group’s Cross Asset Risk Appetite (CARA) measure declined slightly, it remained in positive territory, signaling a decrease in risk appetite in traditional financial markets. Performance dispersion among digital assets decreased compared to the previous week but remained relatively high, indicating that investments are driven by coin-specific factors, emphasizing the importance of diversification.
The market remains in a strong profit environment, with a significant percentage of BTC and ETH addresses in profit. However, as Bitcoin approaches recent highs, profit-taking activity has increased, particularly among short-term holders, leading to higher selling pressure. Furthermore, long-term holders have also increased their transfers of profitable coins to exchanges, which may hinder short-term price increases.
Aggregate open interest in BTC futures and perpetual remained stable, with notable futures short liquidations recorded. Meanwhile, BTC option open interest saw a significant increase, accompanied by relative put-buying and an increase in the put-call open interest ratio. The 25-delta BTC option skews also increased, indicating higher demand for puts compared to calls. However, overall at-the-money (ATM) implied volatilities did not change significantly.
The crypto market has showcased its resilience and ability to outperform traditional assets. Altcoins have gained momentum, reflecting a high-risk appetite within the market. Profit-taking activity has increased, affecting short-term price increases. Market sentiment remains positive, although there have been major reversals in certain indices. Diversification and understanding coin-specific factors are crucial when making investments in digital assets. The BTC futures and options market has remained stable, but there have been notable changes in open interest and option skews. As the market evolves, it is essential to closely monitor these dynamics and trends to make informed investment decisions.