Bitcoin, major tokens drop as traders position for downside protection

Market Overview - Crypto markets are experiencing pressure, with Bitcoin (BTC) showing signs of stabilizing below $70,000 after a volatile weekend, despite a more than 2.8% drop in the last 24 hours [1] - Bitcoin remains above recent lows of around $60,000 but struggles to regain momentum after last week's steep decline, raising questions about whether the market is in a deeper bear phase or nearing a bottom [1] Cryptocurrency Performance - The CoinDesk 5 Index (CD5) fell by 3.4%, with all five largest cryptocurrencies declining; Ether (ETH) dropped about 5% but held above the psychological support level of $2,000 [3] - The broader CoinDesk 20 (CD20) index is down 3.7%, indicating a general decline across major cryptocurrencies [3] Derivatives Positioning - BTC futures are showing a bearish shift, with open interest (OI) decreasing from $19 billion to $16 billion over the past week, indicating sustained deleveraging [6] - Funding rates on Bybit (-2.24%) and Binance (-0.5%) have turned neutral-to-negative, suggesting that short sellers are currently leading the market narrative [6] - The three-month basis has compressed to 3%, reflecting a cooling of institutional demand amid a risk-off sentiment in the derivatives landscape [6] - Options data indicates a defensive shift, with one-week 25-delta skew for BTC rising to 20% and call dominance dropping to 48% [6] - Implied volatility (IV) term structure is in extreme backwardation, with front-end volatility at 85.03%, significantly higher than long-term expectations of around 50% [6] Liquidation Data - Coinglass data shows $397 million in 24-hour liquidations, with a split of 45-55 between longs and shorts; BTC accounted for $234 million, ETH for $74 million, and SOL for $14 million in notional liquidations [6] - The Binance liquidation heatmap indicates $68,160 as a critical liquidation level to monitor in case of a price drop [6] Token Launch and Issues - Crypto wallet Rainbow launched its RNBW token, which faced issues as the price fell to $0.025, a 75% drop from its $0.10 initial coin offering (ICO) two months prior, although it has since risen to $0.031 [6] - The drop in price has led to a significant reduction in expectations for a fully diluted valuation (FDV), which is now closer to $31 million, down from a near 80% high earlier in the year [6] - Delays in token distribution to early buyers and participants in Rainbow's on-chain rewards program contributed to the chaos, with some users reporting they had not received their airdropped tokens [6] - Rainbow's cofounder attributed the issues to backend infrastructure challenges, and U.S.-based investors will not have full access to their tokens until December 2026 due to vesting terms [6][7]