Waiting for Yields to Steady, “Digital Silver” Looks like A Good Trade
Another Rinse
Last week, we talked about the futures market getting ahead of its skis, trading with increased leverage despite a continued lack of follow-through in spot market demand. Well, rates and the dollar have remained stubbornly high on the back of continued hawkish rhetoric from central bankers, and as we will discuss below, global liquidity has pulled back in recent weeks.
Thus, bulls received another blow on Thursday evening when, in the span of an hour, the crypto market experienced a good old-fashioned liquidation cascade.
Total liquidations would amount to nearly $200 million in the span of an hour. The effect on spot market prices was exacerbated by the low liquidity environment that we are in and will likely remain in for the near future.
Below we can see the current market depth – exchange liquidity is anemic. This is important to keep in mind moving forward. Illiquidity is conducive to large candles in both directions.
While open interest remains elevated compared to the total crypto market cap, the good news is that futures traders may be starting to take their feet off the gas, evidenced by falling funding rates on perps.
Market Liquidity Update
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