The crypto market failed to make a meaningful recovery on Tuesday as it continued to languish in "extreme fear" territory following a sell-off on Monday that appears to have eroded investor confidence.

Bitcoin traded around $87,000, down from last week's high of $92,350 as the broader market continued to exhibit weakness despite hopes that there would be a "Santa rally" in December.

The altcoin market wasn't looking much better. Several tokens posted losses of more than 5% over the past 24 hours, led by privacy coins.

Bitcoin has now retraced almost the entire Nov. 21-28 rally, underperforming U.S. equities. The Nasdaq Composite Index rose 6.6% in the same period.

Derivatives positioning

• BTC, ETH, XRP, SOL continue to see an outflow of capital from futures market. Open interest (OI) in futures tied to these tokens has declined as much as 6% in the past 24 hours. Clearly, investor confidence stands dented due to the market's decline and auto-deleveraging-led losses during the Oct. 8 crash.
• BTC's 90-day annualized basis (the gap between futures and spot prices) has collapsed to cycle lows of around 4%-5%. Those for ether are nearing 3%-4%.
• Bitcoin's 30-day implied volatility index, BVIV, is rising relative to Wall Street's VIX index in a sign of heightened uncertainty in the crypto market.
• The spread between ETH and BTC 30-day implied volatility indices has shrunk to 21.50, the narrowest since May 8. The declining trend indicates expectations for more turbulence in BTC.
• On Deribit, put skews remain intact in BTC and ETH options.
• Block flows featured bias for put spread and calendar call diagonal spread strategies in BTC. In ETH's case, traders chased risk reversals and put spreads.

Token talk

• The altcoin market continued to lag behind bitcoin BTC$87,372.07 on Tuesday, with ether ETH$2,822.58 and XRP$2.0352 each sliding by around 0.6% in 24 hours while BTC posted a 0.75% gain.
• Privacy coins were the hardest hit as zcash ZEC$324.75 extended losses with an 8% move to the downside, marking a 33% decline over the past week.
• Monero XMR$387.99 and dash DASH$46.21 performed almost as poorly, each losing between 5% and 6% as traders appeared to be moving on from the privacy coin boom, which now appears to have been a flash in the pan rather than a material change in trader behavior.
• CoinMarketCap's "altcoin season" indicator continues to stagnate at 24/100, suggesting that preference remains with bitcoin and a select few DeFi tokens where investors can generate a yield despite the market being in decline.
• One of the recipients of that DeFi interest is SKY, formerly MKR, which rose by 6.7% on Tuesday after an announcement was made about token buybacks.
• Another narrative behind SKY's rise has been increased interest in the related USDS token, formerly DAI, which has grown from a $7.6 billion to $9.5 billion market cap in two months.
• USDS is the native stablecoin of the Sky ecosystem. Investors can currently generate a yield of 4.5% through staking.