The crypto market reeled on Monday after a sell-off that occurred minutes after CME's bitcoin BTC$85,516.82 futures markets opened. The CoinDesk 20 (CD20) Index is down by 5.98% in the past 24 hours as a result.

The jitters can be attributed to crypto's low liquidity trading environment that still hasn't recovered from October's $19 billion liquidation cascade.

Macro news in Japan also played a part as Bank of Japan Governor Kazuo Ueda made comments hinting at an interest-rate increase this month, a suggestion that lifted Japan's 30-, 10- and 2-year government bond yields to levels not seen since 2008.

The potential move to raise interest rates would strengthen the yen, potentially causing hedge funds that historically borrow the yen to buy risk assets like bitcoin to reposition.

Derivatives positioning

• The market swoon was accompanied by capital flight from crypto futures, where open interest (OI) in coins like ZEC, SUI, UNI, ENA collapsed by over 10% in 24 hours.
• OI in BTC has dropped by 2% while ether's OI has ticked higher slightly to 12.51 million ETH, the most since Nov. 21. Traders could be shorting the price drop.
• Sentiment has decisively shifted bearish in the wider market, as evidenced by the -7% to -11% annualized funding rates for several tokens such as SOL, BBB, XRP, AVAX and DOT. Negative rates imply a bias for bearish short positions.
• Volmex's BVIV, the 30-day bitcoin implied volatility index, shot up during Asian hours, signaling renewed fear as prices dropped. The index briefly topped 55% and has since retreated slightly to 53%.
• On Deribit, put skews have strengthened in short- and near-dated BTC and ETH options.
• Block flows featured BTC strangles and ETH straddles. Both strategies are employed by traders when anticipating a volatility boom.

Token talk

• The altcoin market wasn't immune to the wider crypto market slump on Monday; zcash ZEC$354.74 lost 20% of its value in 24 hours while ENA$0.2382 and TIA$0.5697 dropped by 16% and 14%, respectively.
• Of the $637 million worth of liquidations in the past 24 hours, more than $430 million were caused on the altcoin market as several tokens formed lower highs to extend downtrends dating back to early October.
• The market is now approaching a perilous position because if November's lows are taken out it would confirm a bearish reversal from October's highs.
• However, the average relative strength index (RSI) indicator is currently showing "oversold" conditions, which means the market is likely due a relief rally at some point as those in short positions take profits.
• A handful of tokens are still positive over the past seven days. These include layer-1 blockchain token KAS, which is up by 29% and SKY, the DeFi token formerly known as MKR, which rose 17% in the past week after a series of buybacks were announced.
• The "altcoin season" indicator remains stuck at 24/100, down dramatically from September's heights of 78/100 to suggest that investors still prefer the more liquid and more stable bitcoin.