Cryptocurrency Market Summary

Cryptocurrency markets were relatively stable on Wednesday as traders processed some recent developments and anticipated the U.S. inflation report, which could influence risk assets significantly.

Harmony, a layer 1 blockchain network built for decentralized finance (DeFi) applications, confirmed it was compromised in the early hours in Asia. An attacker managed to mint around 4 billion ONE tokens through empty blocks, accounting for roughly 26% of the token’s circulating supply.

About 2.8 billion of these tokens found their way onto exchanges quickly, resulting in ONE’s price plummeting by 40%, hitting an all-time low.

As for the broader market, not much changed leading up to the release of the July U.S. Consumer Price Index (CPI), scheduled for 12:30 UTC. Additionally, Brent crude oil hovered around $90 a barrel due to renewed concerns over supply following Houthi attacks on shipping in the Bab el-Mandeb Strait and incidents involving U.S. vessels in the Gulf of Oman.

Bitcoin saw a slight uptick, rising by 0.23% from midnight UTC to around $63,900, while the fear and greed index held steady at 38.

Derivative Market Insights

• Stagnation in futures markets indicates a bearish sentiment shift. While the crypto futures market seemed stagnant with minimal changes in total volume and open interest, the sentiment has shifted. The long-short ratio of market participants—those who execute market orders—now shows a bearish trend, with short sells making up 51.36% of trades, a stark reversal from earlier bullishness.
• Avalanche is experiencing active short selling as open interest increases. Despite a 6% rise in open interest (OI), the AVAX token has struggled amongst the top 100 coins, indicating market weakness. The negative 24-hour cumulative volume delta (CVD) is the worst among major assets, suggesting bears are shorting aggressively rather than using limit orders.
• Dogecoin is seeing increased leverage, hinting at potential volatility. Open interest for DOGE futures has risen to over 17.2 billion tokens, marking the highest level since October. This rise followed a significant increase from the June low of 12 billion tokens, all while prices lingered around seven cents. This growing leverage amid sideways price action may imply a looming volatility event.
• Major assets face weak positioning. Participation in Bitcoin and Ethereum remains limited, with Bitcoin’s open interest below 750,000 BTC. This trend of low momentum has continued for several weeks, seen similarly in ether, indicating that both institutional and retail investors are stepping back from these major assets.
• Dominating selling pressure in altcoins. Most top 25 cryptocurrencies have posted negative 24-hour cumulative volume deltas, signaling a general bearish trend. Specific examples like Chainlink and Kronos underscore this pressure, reflecting a prevalent market sentiment of selling.
• Subdued implied volatility before key U.S. inflation data. Bitcoin’s 30-day Implied Volatility Index has dipped to 37.5% from a peak of 38.66% earlier this week. Low short-term implied volatility suggests that options traders aren’t expecting drastic changes post-CPI release, raising questions about whether the market is underestimating event risks.
• Options traders eye the $70,000 level while hedging. The $70,000 call option has seen a lot of action in Deribit’s Bitcoin options market over the last couple of days. At the same time, there’s an uptick in the use of Bitcoin strangles, which involves buying puts and calls to profit from significant movements in either direction.

Token Performance Highlights

• CRV has been a strong performer this week, gaining about 35% over the last seven days, now trading around 28 cents. This rally coincides with impending annual emissions reductions of 15%.
• Uniswap (UNI) has seen over a 10% drop in the last 24 hours, yet no clear reason for this decline has emerged, pointing to the fragility of the altcoin market due to limited liquidity.
• Monero (XMR) has recovered too, up 5.8% since midnight, bouncing back from yesterday’s losses.
• AI tokens like NEAR, FET, and TAO have also shown positive movement, with increases ranging from 1.3% to 2.3% as the market gains some renewed optimism surrounding AI themes.