Crypto Markets Retreat Amid Risk-Off Sentiment Following Fed Decision
Even though the Federal Reserve’s decision to hold interest rates at 3.5%-3.75% was widely anticipated, rising geopolitical tensions and a rotation into safe-haven assets left crypto traders facing a sea of red.
Bitcoin BTC $82,550.64 slid back toward $88,000 over the past 24 hours as risk-off sentiment swept global markets. Major U.S. stock indexes saw mixed moves, with the S&P 500 briefly topping 7,000 before retreating, influenced by earnings reports from large companies.
In crypto, the sell-off was more pronounced. The CoinDesk 20 (CD20) index dropped 2.9%, while gold surged to record highs above $5,500 an ounce, lifting gold-backed tokens like XAUT $4,897.90 amid accumulation by Tether and central banks. Silver extended gains to $117 per ounce. Bitcoin continues to trade more like a liquidity-sensitive risk asset than a hedge, despite the U.S. Dollar Index (DXY) falling to a four-year low this week.
Derivatives Positioning
- Total open interest in crypto futures fell nearly 3% to $132.26 billion, signaling growing risk aversion.
- $348.3 million in crypto futures liquidations occurred over 24 hours, a 13% increase, mostly affecting long positions.
- Despite falling prices, 30-day implied volatility for bitcoin and ether remains near multimonth lows, suggesting traders expect calmer conditions.
- Futures open interest tied to HYPE dropped over 12%, driving outflows from major tokens including BTC, ETH, SOL, and XRP.
- Annualized perpetual funding rates for top cryptocurrencies are now barely above zero, down from highs of 10% earlier this week. Funding rates for XLM have turned negative, indicating a bearish bias.
- In the Deribit options market, BTC and ETH puts remain at a premium to calls, with a stronger put bias in ether. Large block trades favored BTC call spreads and ETH put calendar spreads, strategies designed to profit from low volatility and time decay.
Token Updates
- Optimism’s community approved a 12-month plan to buy back OP tokens using revenue generated by its Ethereum layer-2 networks. Over 84% of participating votes supported the measure, which passed quorum just before the deadline. Pending final approval by the protocol’s Joint House with a 60% majority, the Optimism Foundation will start converting ETH from sequencer fees into OP beginning February.
- Half of the Superchain’s revenue, estimated at over $17 million last year, would fund monthly OP token purchases. The Superchain includes chains such as Coinbase’s Base and World Chain.
- Critics argued that pairing buybacks with token emissions could offset value returned to holders, but the foundation said the plan aligns the OP token with network growth while preserving funds for ecosystem development.
- OP’s price has fallen 80% over the past year, trading below 29 cents and dropping an additional 5% in the last 24 hours.
