Blood is on the streets once more — following a 2-week consolidation in the 40–44k range, 40k resistance area gave way on Friday with heavy volume. The crucial $43.5k region, which coincided with Friday option expiry’s max pain price as well as resistance from Nov’21, gave way to the bears, and weekend continued to see heavy risk-off. Bitcoin sharply sold to $34k on Saturday (representing >50% drawdown since ATH of $69k last November), and has been trading $34–36.5k range since. Bitcoin (- 19%) outperformed alts, resulting in bitcoin dominance to buck the trend and increase from 39.5% to 41.5% (+200bp). Recent ‘meta’ of FOAN complex saw sharpest drawdown (>40%), with the exception of $ATOM. Solana also came under fire for 48-hour network outage during the weekend. It’s not the first time such outage has happened, but the outage was ill-timed, and caused not insignificant liquidations in the ecosystem.
On the derivatives side, BTC and ETH perpetual funding rates finally turned negative meaningfully (Chart 1), in line with precipitous drop in prices. The 2-day sell-off also brought about ~$1.5bn in long liquidation (Chart 2) — highest number since 12/4. This is in stark comparison to 12/4/2021 when despite ~$2bn wipe out in open interest (including ~$1.6bn in long liquidation), bitcoin perpetual funding rate remained positive.
On the institutional side, a fair mix of negative and positive news were in the headlines. On the negative side, SEC rejected MicroStrategy’s bitcoin accounting principles; Russia followed China’s foosteps of banning crypto (both use and mining). On the positive side, El Salvador added another 410 Bitcoins for $15mio; Google announced its digital card may consider accepting crypto payment or transaction, whilst FTX, a crypto-native firm, would be launching physical Visa Debit Card where users can store and use cryptocurrency, and enjoy free-of-charge payment and transaction. Meta (previously known as Facebook) is exploring ways to let users share their NFT on social media (eg. Facebook, Instagram, etc.).
On the macro side, interest rates fears weighed heavily on markets; S&P500 saw biggest decline in more than 14 months over the holiday-shortened week, whilst NQ slumped ~7.5%, biggest weekly drop since the start of the pandemic. With NQ and ES both below their 200-day moving average (first time since April’20), further downside is expected. There is also increased chatters of 50bp increase in the fed funds target rate on its March meeting vs. anticipated 25bp. Going forward, all eyes are on FOMC meeting on Wednesday, as well as continued earnings season.
We have turned fully defensive following the break of $43.5k last Friday, and with such terrible technical, path of least resistance is for crypto to go lower. Good luck (we might really need it this time)!