Bitcoin slides below $88,000 as risk-off sentiment sweeps crypto markets

Bitcoin slides below $88,000 as risk-off sentiment sweeps crypto markets

Bitcoin fell back toward $88,000 on Wednesday as risk-off sentiment gripped global markets, with the broader cryptocurrency sector experiencing significant losses amid geopolitical tensions and a rotation into safe-haven assets.

The Federal Reserve’s decision to hold interest rates steady at 3.5%-3.75% was widely anticipated, but growing concerns about global stability prompted traders to flee riskier assets. The CoinDesk 20 index lost 2.9%, reflecting broader weakness across major cryptocurrencies.

Gold surged to record highs above $5,500 per ounce, attracting capital from crypto markets. Gold-backed tokens like XAUT climbed as Tether and central banks aggressively accumulated the precious metal. Silver extended gains to trade at $117 an ounce.

Bitcoin and the wider crypto market continue to trade as liquidity-sensitive risk assets rather than reliable hedges, given their deeper liquidity pools that allow investors to quickly rotate out of the sector. The U.S. Dollar Index fell to a four-year low this week, but market participants are not interpreting this as a structural shift.

Derivatives Signal Caution

Cumulative notional open interest in crypto futures dropped nearly 3% to $132.26 billion, signaling growing aversion to risk among traders. Crypto futures liquidations reached $348.30 million in the past 24 hours, a 13% increase, with most losses concentrated in bullish long positions.

Annualized perpetual funding rates for major cryptocurrencies have fallen to barely above zero, a stark contrast to the 10% rates seen earlier in the week that signaled bullish momentum. Funding rates for Stellar (XLM) have turned decisively negative, indicating trader bias toward bearish bets.

Despite recent price declines in Bitcoin and Ethereum, their 30-day implied volatility indexes remain pinned near multimonth lows. This suggests traders continue to expect calmer market conditions rather than panic selling ahead.

In the options market, the mood remains cautious. Bitcoin and Ethereum puts are trading at a premium to calls on the Deribit exchange, with Ethereum showing a relatively stronger put bias. Block flows featured Bitcoin call spreads and Ethereum put calendar spreads, both strategies designed to profit from low volatility and time decay.

Optimism Approves Token Buyback Plan

Optimism’s community approved a 12-month plan to repurchase OP tokens using revenue generated by its network of Ethereum layer-2 chains. More than 84% of participating votes supported the measure, which reached quorum just ahead of its deadline.

If the protocol’s Joint House reaches a 60% majority in a final vote, the Optimism Foundation will begin converting Ethereum earned from sequencer fees into OP tokens starting in February. The Superchain, which includes Coinbase’s Base and World Chain, generated over $17 million in revenue last year, with half directed toward monthly token purchases.

OP’s price has declined 80% over the past year and now trades below 29 cents, falling an additional 5% in the last 24 hours. Some community members argued that pairing buybacks with token emissions negates value returned to holders, but the foundation countered that the buyback aligns the OP token with network growth while preserving funds for ecosystem development.

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