Market Update - 18th January 2025

Market Commentary

This week proved pivotal for digital assets, with Bitcoin starting the week below the critical $90K support level. Significant buying interest below this level drove a sharp recovery, and BTC rallied aggressively for the rest of the week. By week’s end, BTC had convincingly broken through the $100K-$102K resistance area, trading near $105K at the time of writing, with market attention now turning to a potential retest of the all-time high at $108K.

A softer-than-expected US CPI report on Wednesday eased inflation concerns, providing a tailwind for risky assets, including Bitcoin. The rally was primarily spot-driven, following a month and a half of consolidation that helped clear leverage from the market—a bullish sign. On the downside, key support levels are at $100K, $95K, and the $90K zone.

The market is closely watching Trump’s inauguration on Monday, with expectations of pro-digital asset executive orders in his first days in office. Additionally, a tweet from Trump on Friday night about his meme coin (TRUMP), trading on Solana, spurred aggressive buying in Solana, which is now trading sharply higher.

It’s worth noting that US markets will be closed on Monday for a public holiday, which, coupled with crypto markets remaining open, could lead to heightened volatility in response to any unexpected announcements or events.

Derivatives Markets Insights:

Funding rates:

Funding rates remained subdued despite the sharp BTC rally, indicating the move was driven by strong spot demand.

7-day accumulated funding rate in USDT-margined perpetual swaps across top exchanges:

• Binance 6.25%
• OKX 6.25%
• Bybit 8.75%

Futures Basis:

Conversely, futures basis increased significantly as BTC rallied:

• BTC January 31st expiry: approx. 12.00% (up from 7.5%)
• BTC February 28th expiry: approx. 12.5% (up from 10.00%)
• BTC March 28th expiry: approx. 12.75% (up from 10.25%)
• BTC June 27th expiry: 13.25% (up from 12.25%)

Options implied volatility:

• Implied volatility traded higher, especially in the short term.
• BTC ATM Implied Volatility:

o?? 1W: 57.5% (up from 54%)

o?? 1M: 59% (up from 56.5%)

o?? 3M: 60% (up from 59.25%)

o?? 6M: 60.75% (up from 60.5%)

o?? Deribit Volatility Index: 63?(up from 58.25)

• Skew: call skew increased substantially across maturities, especially in the shorter term, reflecting growing expectations of future upside.

Liquidations:

Approximately $100M in long positions were liquidated on Monday as BTC briefly dipped below the $90K level.

Key takeaways:

• BTC Rally Toward All-Time Highs: BTC recovered strongly from below $90K, breaking through key resistance at $100K-$102K, with attention now on the $108K all-time high retest.
• Spot-Driven Momentum: The rally was primarily driven by spot buyers, supported by reduced leverage in the market after weeks of consolidation.
• Derivatives positioning suggests growing expectations of upside: while perpetual funding rates have remained at moderate levels, futures basis and call skew increased substantially across maturities.
• Macro: Softer-than-expected US CPI data relieved risky assets, adding to Bitcoin’s bullish momentum.
• Trump’s Inauguration and Market Impact: Markets anticipate potential pro-digital asset announcements from Trump’s first days in office, with Monday’s US market holiday possibly amplifying volatility in crypto.
• Solana Surge: Trump’s tweet about his meme coin on Solana has triggered a sharp rally in Solana, highlighting how narratives can drive short-term market moves.