OTC Weekly Trading Insights (02/27/2025)

Top Interest of the Week The cryptocurrency market has seen a general downturn following the hack of the Bybit exchange last Friday and a prevailing risk-averse sentiment stemming from global trade tensions. However, our analysis indicates that certain altcoins have outperformed the broader market, driven by rising trading interest.The Sei Network ($SEI), a layer 1 blockchain focused on decentralized exchanges, appears poised for a significant turnaround. This optimism was sparked by a recent purchase of $125K worth of SEI tokens through a multi-signature wallet by World Liberty Finance (WLF) via CowSwap. This transaction has reignited investor interest, leading to a 15.8% increase in SEI's price, even as Bitcoin experienced a 12.4% drop.Raydium ($RAY), a leading DEX on the Solana network, has faced a substantial sell-off, resulting in a 41.3% drop in value following speculation regarding Pump.fun's automated market maker (AMM). As Pump.fun is a platform for launching meme coins, the potential establishment of its own AMM could significantly reduce trading volume on Raydium. Additionally, selling pressure has intensified with the upcoming Solana unlock in March, contributing to a bearish sentiment that has adversely affected Raydium.THORchain ($RUNE), the native token of the non-custodial, cross-chain liquidity protocol, has surged by an impressive 36.3% over the past week. This increase comes despite a generally bearish market and follows a remarkable 300% rise in DEX trading volume over the last month. The recent hack of the Bybit exchange, which resulted in the loss of 499,000 ETH and the laundering of $250 million through the blockchain protocol, may have contributed to the heightened trading activity on THORChain.Overall MarketSource: TradingView The above chart is the BTC price in the daily candle chart at the log scale.In our previous update, our OTC desk provided a detailed analysis of BTC price movements, projecting a bullish trend. This was confirmed when BTC surged above $98k last Thursday, indicating strong market momentum. However, the market sentiment shifted dramatically following the Bybit hack last Friday, which led to significant asset withdrawals by its clients. This reaction was driven by fears of a potential collapse similar to FTX, causing widespread panic in the crypto market. The resulting price disparity between Bybit and Binance led to a sharp decline in cryptocurrency prices. In the initial hours following the Bybit CEO's announcement of a $1.5 billion loss due to the hack, the BTCUSDT pair experienced a price gap exceeding $400 between Bybit and Binance.Despite Bybit's efforts to stabilize the situation by fulfilling all withdrawals and repurchasing the missing ETH for its clients, the market sentiment turned bearish, and the momentum structure was compromised. Additionally, increasing global trade tensions and a more risk-averse investor sentiment, exacerbated by the Trump administration's policies, further pressured the market. The likelihood of a rate hike by the Bank of Japan in March, coupled with the Federal Reserve's pause on rate cuts, has also contributed to reduced capital market liquidity. Our desk observed risk-off sentiment across all asset classes, with the US stock market dropping four consecutive trading days.From a technical analysis perspective, BTC lost its critical support level after breaching $89k. Historically, BTC surged rapidly from $76k to $89k within two days, indicating minimal support/resistance between these levels. Consequently, the next strong support level is at $76k. The recent three-day selloff, marked by three consecutive red candles with significant volumes, underscores the strong downside momentum. However, a positive observation is that some altcoins have decoupled from BTC's decline, with a few even posting double-digit gains as BTC dropped to $83k.Our desk remains optimistic about BTC's long-term prospects, firmly believing that the current cycle's peak has not yet been reached. Nevertheless, the market structure requires time to recover, and we anticipate a period of sideways trading before BTC regains upward momentum and targets new highs.Potential catalysts that could bolster bullish sentiment include:The Trump administration is raising the Bitcoin Reserve agendaAny state approving the State Bitcoin Reserve PlanPostponement and negotiation of tariffs on US trading partnersA decrease in the PCE price index, closely monitored by the Federal Reserve for inflationWe will continue to monitor these developments closely and provide updates as the situation evolves.Options Market  The above table is the 25-delta skew on BTC and ETH options.The cryptocurrency market has faced significant selloffs over three consecutive days, largely driven by escalating worries about the 25% tariffs imposed by the Trump administration on its trading partners, including Canada, Mexico, and the European Union. These tariffs have sparked a wave of uncertainty across financial markets, resulting in heightened volatility and a more cautious approach from investors. Consequently, the short-term options for Bitcoin (BTC) and Ethereum (ETH) have shown a negative skew, indicating that options traders are increasingly inclined to pay higher premiums for put options, which act as a safeguard against potential further declines in these cryptocurrencies' prices.In contrast, our analysis of medium- to long-term options for BTC reveals a positive skew. This suggests that institutional investors remain optimistic about Bitcoin's long-term outlook, despite the recent market challenges. The readiness to pay higher premiums for call options in longer-dated contracts reflects a belief in BTC's potential for recovery and appreciation, showcasing confidence in its fundamental strength and future growth prospects.Conversely, Ethereum presents a different scenario. While it shows a less negative skew in the short term compared to Bitcoin, its longer-dated options indicate a weaker positive skew. This suggests that institutional investors harbor less confidence in ETH's long-term potential. The tempered optimism surrounding Ethereum can be linked to its lackluster performance over the past two years, raising doubts about its ability to compete effectively in the fast-changing cryptocurrency market. Thus, while there is some belief in ETH's short-term recovery, the overall sentiment regarding its long-term value remains cautious and less enthusiastic than that for Bitcoin.Macro at a glance Last Thursday (25-02-20)US initial jobless claims continue to stay low, with a report of 219,000 claims last week. The Philadelphia Fed Manufacturing Index experienced a notable decline, falling from 44.3 in January to 18.1 in February, which was below the anticipated figure of 19.4.Last Friday (25-02-21)Japan's national core Consumer Price Index (CPI) recorded a 3.2% year-over-year increase in January, surpassing the anticipated 3.1%. This strong inflation trend suggests that the Bank of Japan may implement another interest rate hike in March. In the UK, retail sales growth in January exceeded expectations, rising by 1.7% month-over-month, compared to the forecasted 0.4% increase. Core retail sales also performed well, achieving a 2.1% monthly growth, significantly above the predicted 0.9%.The University of Michigan's 5-Year Inflation Expectations indicated a median price increase of 3.5% over the next five years, which is higher than the expected 3.3%.The S&P Global Manufacturing Purchasing Managers' Index (PMI) recorded a reading of 51.6 in February, slightly above the forecast of 51.3. Conversely, the S&P Global Services PMI experienced an unexpected decline, registering at 49.7 instead of the anticipated 53.0. This disappointing PMI figure has raised concerns in the market regarding a potential slowdown in US economic growth.On Monday (25-02-24)Eurozone Consumer Price Index (CPI) indicated a 2.5% year-over-year increase in January, meeting market forecasts.On Tuesday (25-02-25)The US Conference Board has indicated a decline in consumer confidence, decreasing from 105.3 in January to 98.3 in February. This suggests that American consumers are becoming more hesitant to spend, likely due to concerns about potential inflation resulting from tariffs imposed during Trump's administration.On Wednesday (25-02-26)The core Consumer Price Index (CPI) in Japan experienced a 2.2% annual increase, surpassing the anticipated 2.0%. After the higher-than-expected CPI number, the likelihood of the Bank of Japan implementing another rate hike in March has risen.Convert Portal Volume Change  The above table shows the volume change on our Convert Portal by zone. Last week, the market experienced a bearish shift following a $1.5 billion USD hack on the Bybit exchange. Despite a temporary surge in ETH prices due to the expectation that Bybit would need to repurchase 500,000 ETH for its clients, the market subsequently declined once the buyback was completed. Investor concerns regarding tariffs from the Trump administration, along with the increasing probability of a rate hike by the Bank of Japan and a potential pause by the Federal Reserve in March, led to a reduction in liquidity.In the Megadrop market, trading volume increased by 47.8%, with BounceBit ($BB) being the primary contributor to this rise. In the AI sector, trading volume saw a 34.2% increase last week, with Vana ($VANA) and Bittensor ($TAO) being the leading contributors to this growth.In the POW sector, trading volume rose by 22.5% last week, primarily fueled by increased demand for BTC ($BTC) and Dogecoin ($DOGE) amid market fluctuations.Why trade OTC?