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April's Market Trends: Interest in Cryptocurrency Falling

As both BTC and ETH saw open interest and futures premiums falling, coupled with geopolitical tensions and competitive pressures, the cryptocurrencies market has moved towards a more cautious outlook.

As both BTC and ETH saw open interest and futures premiums reduced, coupled with geopolitical tensions and competitive pressures, the cryptocurrencies market has moved towards a more cautious outlook.
Credit: Foretoken Media 2024

In April, the cryptocurrency market saw a significant decline in interest from both retail and institutional investors. This shift is evident in the falling open interest figures and various other market indicators.

Both Bitcoin (BTC) and Ethereum (ETH) experienced a notable decrease in open interest on exchanges, with BTC and ETH seeing declines of over 19%. The trend was even more pronounced on the Chicago Mercantile Exchange (CME), which caters more to institutional participants. Here, open interest for BTC fell by 24.74%, and for ETH, it plummeted by 41.8%.

Introduction of Volatility Perpetual Futures by Bitfinex

On April 3, Bitfinex introduced volatility perpetual futures for Bitcoin and Ether. These futures are linked to the Volmex Implied Volatility indexes, specifically the Bitcoin Implied Volatility Index (BVIV) and the Ethereum Implied Volatility Index (EVIV). These indexes monitor the 30-day expected volatility of BTC and ETH options contracts, providing a new tool for investors to hedge against volatility.

Negative Open Interest-Weighted Funding Rates

For the first time in over six months, the Open Interest (OI)-weighted funding rate for BTC and ETH turned negative. BTC experienced this on April 14, 15, and 18-23, while ETH saw similar trends on April 14, 17, 20, 22, and 23. This shift indicates a bearish sentiment among traders, as they were willing to pay a premium to maintain short positions.

Market Outlook and Historical Trends

Between May and October, both traditional finance and crypto markets typically experience a period of stagnation, often referred to as the “Sell in May and go away” phenomenon. Historical data from Coinglass shows that during these months, derivatives open interest and perpetual funding rates remain stagnant.

This stability coincides with a lack of volatility and performance for both BTC and ETH, which historically averaged gains of 6.49% and 4.01% in Q3, respectively. If historical trends continue, we can expect reduced activity in derivatives in the coming months if interest in cryptocurrencies continues falling.

Sentiment and Market Caution

The reduced open interest reflects a cautious stance from both retail and institutional investors, who are waiting for clearer market direction. This reduction in activity has led to lower liquidity and declines in futures premiums and funding rates. The market has shifted from March’s euphoria to a more cautious outlook.

Analysis of Derivatives Market Share

In April, derivatives held a 60% market share in crypto trading volume, down from February’s 70.1% and March’s 67.8%. This decrease in interest in derivatives trading is further evidenced by the decline in futures premiums. Across major exchanges like Binance, Deribit, BitMEX, Bybit, OKX, and Huobi, the basis rate for BTC and ETH contracts fell below 5% by the end of April.

Impact of Geopolitical Tensions and Liquidations

On April 12 and 13, long liquidations on Bitcoin totaled $784.714 million and $771.441 million, respectively, triggered by escalating geopolitical tensions between Iran and Israel. Such large-scale liquidations are rare, with similar events occurring only twice since 2023. These instances highlight the market’s sensitivity to sudden changes, which is also reflected in derivative metrics like the option skew delta 25.

Investor Outlook and Competitive Pressures

BTC’s 60, 90, and 180-day skews remained positive, but its 30-day and 7-day skews turned negative and stayed there until the end of April. ETH displayed a different pattern, showing negative skews across the 7, 30, 60, and 90-day periods, signaling a cautious investor outlook. This negative sentiment may be rooted in Solana surpassing ETH in decentralized exchange volume, establishing itself as a significant competitor.


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