Crypto Markets Daily Jan 08 2025

Yesterday’s good news regarding the health of the U.S. economy did not go down all that well in spot and derivative markets. Futures-implied yields have collapsed to their lowest levels in over a month and ETH's funding rate has turned negative, a strong indication of bearish sentiment.

Crypto

Derivatives

DeFi

Macro

Good News is Bad News

Yesterday’s good news regarding the health of the U.S. economy did not go down all that well in spot and derivative markets. To recap, the JOLTS report showed the highest number of job openings in November for the past six months and the ISM Services Index showed the price for services and materials rose 6 points. The latter suggests stronger business activity and a potential pass-through effect into services inflation. Both pieces of data point to a conclusion that Chair Powell stated back in mid-November – “the economy is not sending any signals that we need to be in a hurry to lower rates” and has sent risk-on assets (particularly crypto) down.

If the FOMC is taking the cautious, ‘no hurry’ approach, derivatives markets definitely didn’t feel like taking a page out of that playbook. We mentioned previously that derivatives markets had already failed to support BTC’s run above $100K in the same vein as they had late last year. Futures-implied yields have collapsed to their lowest levels in over a month following the aforementioned macro releases, and ETH's funding rate has turned negative, a strong indication of bearish sentiment, though it did so with a slight lag behind BTC (see the second chart below).

Figure 1. BTC Futures Implied Yields at selected tenors. *Source: Deribit, Block Scholes*

Figure 2. BTC (yellow) and ETH (purple) One-Month Futures-Implied Yield. *Source: Deribit, Block Scholes*

Figure 3. BTC Perpetual Funding Rate. *Source: Deribit, Block Scholes*

Figure 4. ETH Perpetual Funding Rate. *Source: Deribit, Block Scholes*

That isn’t to say however that all hope is lost – longer-tenor options markets continue to indicate a more bullish outlook further out, with a positive skew towards OTM calls for BTC and ETH at tenors longer than 14 days.

Figure 5. BTC 25-delta put-call skew ratio at selected tenors. *Source: Deribit, Block Scholes*

The pullback in BTC and ETH’s spot price currently sees the two assets trading at $95K and $3.4K respectively. As in typical altcoin fashion, a sea of 10-15% losses is pretty clear across the market: SOL is down 7%, DOGE is down 10% and ADA is down 14%. Ripple has also fallen, though slightly less than the rest (4%) amidst news of a new partnership between its USD stablecoin, RLUSD and Chainlink, to deliver RLUSD price feeds on the Ethereum blockchain and the XRP Ledger.

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