Crypto's Leverage Wipeout

Welcome to Today in Markets, where we dig into the hottest trends and assets in crypto, highlighting investable opportunities for our paying Bankless Citizens.

📊 Quick Take

Nature is Healing. Crypto prices are back on the offensive after yesterday’s broad market pullback, with Bitcoin gaining 4.5% to yet again position itself within reach of achieving new all-time highs!

For the past week, crypto markets had been signaling that prices were overextended and due for a correction, and yesterday’s leverage wipeout facilitated the much anticipated return to equilibrium. Should you take the opportunity to get long?

🧐 The Alpha

Bitcoin’s sudden 15% drop was felt around the market yesterday, but the decline was even more pronounced in alts, where tokens like SOL fell 26% and zeitgeisty memecoins like WIF tanked nearly 50%!

Extreme volatility led to over $1B in liquidations yesterday and wiped out large swaths of open interest (OI), with aggregate OI on BTC futures products alone tumbling by $3B (16%) off its peak as traders were forced to hastily de-lever and close their positions.

Yesterday’s dip decimated longs and was the first large plunge in price since spot BTC ETF inflows accelerated in late January, providing optimal entry conditions for patient longs with capital on the sidelines unwilling to ape into an overextended market.

Funding rates, which retraced to near-normalcy of 20% and below for many crypto assets, are on the rise today with increasing OI but remain well below the heavily extended levels they found themselves at earlier in the week, providing much-welcomed relief to levered longs who are now making smaller funding payments to shorts to stay in position.

While crypto prices have pumped aggressively off their local bottoms, the current state of the market is undeniably healthier from a technical perspective than it was just days prior, creating conducive conditions for bulls to increase their holdings.

Should we truly be in a bull market, dips along the way are to be expected, and drawdowns like the one we experienced yesterday present excellent buying opportunities for market participants with spare capital.

📈 Chart of the Day

The Egyptian Pound lost over a third of its value in US dollar terms this morning after the nation switched to a flexible exchange rate to comply with the conditions of an $8B bailout from the International Monetary Fund.

If only there were alternative currencies with transparent rules for people to store their wealth within...

🗣️ Post of the Day

SEC Commissioners Hester Peirce and Mark Uyeda write a scathing rebuke of their agency’s decision to charge ShapeShift with violating federal securities laws, noting the ambiguity created for the crypto industry by the Commission’s current approach to regulating digital assets.