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Weekly: Chaotic Crossroads

Near term hawkish conditions have driven recent narratives, though long term positioning remains optimistic.

April 19, 2024

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Key takeaways

  • The sharp move downward in the wake of elevated Middle East conflicts last weekend and continued chop lower has flushed out a significant amount of leverage in the space – even as the Bitcoin halving draws near.
  • BTC perpetual futures funding rates briefly flipped negative for the first time since October 2023, and have since remained near zero.
  • Drawdowns thus far in 2024 have been the smallest to date at 16% and 27% for BTC respectively, even less than the previous record 2023. Thus could open up some more room to the downside, and traders have been positioning accordingly based on options and onchain data.

Written by

  • David Han, Institutional Research Analyst

Market View

With the halving right around the corner, leverage has been largely flushed out of the space. The sharp move downward in the wake of elevated Middle East conflicts the past weekend combined with the continued chop lower throughout this past week saw BTC perpetual futures funding rates briefly flip negative for the first time since October 2023. Funding rates have since remained near zero, and have flip-flopped across the zero mark multiple times in recent days. In our view, this could indicate some temporary short biases but not widespread panic. We think this directional uncertainty speaks to our thesis of bitcoin’s divergent roles both as a risk and a safe haven asset. While sellers on the margin appear to be primarily derisking, there have also been strong bids between the $60-62,000 levels.

That is not to say markets can not go lower, however. 2023 was the best full year for crypto from a maximum drawdown perspective with a peak drawdown of 20% and 27.4% for BTC and ETH respectively. Prior to this, the years with the smallest max drawdown was 2016 for BTC at 31.3% and 2021 for ETH at 57% (see Table 1). Drawdowns thus far in 2024 have been even smaller than those in 2023, and given the elevated levels of realized volatility YTD, a further move downwards is well within the realm of possibility.

Screenshot 2024-04-18 at 6.05.41 PM

Volatility has broadly been decreasing for the asset class since its inception more than 15 years ago, though a local bottom in realized 3-month volatility was reached in October 2023 (see Chart 1). Since then, there has been a steady reversal upwards with increasing volatility. We think if we continue to embark on a hawkish risk off environment, those who view bitcoin as a risk asset could continue to sell until they come into balance with the latter group that views bitcoin as a safe haven asset.

Screenshot 2024-04-18 at 5.58.01 PM

Indeed, short term traders on Deribit appear to be hedging for a further move downwards in the near term with an implied volatility premium for options below the strike price. What’s interesting, however, is that these premiums skew to the upside for longer dated options expiring in June 2024 and later. We think this is reflective of broader cyclical sentiment where we appear to be far from a cyclical peak, but have risk of further chops downward in the near term.

Onchain measures of leverage also reflect this positioning. Stablecoin deposit rates on Aave have come down more than 50% from their March peaks, but remain elevated beyond the late January 2024 lows of this year. In our view, this signals that traders still retain some leverage (and are thus constructive in the longer term), but have derisked their positions somewhat to survive a shorter term move to the downside. 

Screenshot 2024-04-18 at 5.59.09 PM

Crypto & Traditional Overview

(as of 4pm EDT, Apr 18)



Mkt Cap

24 hour change

7 day change

BTC correlation













Gold (Spot)






S&P 500



















MTD flow (US$B)

YTD flow US$B)


Bitcoin held (BTC M)

Spot BTC ETFs (US)





Source: Bloomberg

Coinbase Exchange & CES Insights

Volumes picked up over the weekend and remained high throughout the week. Saturday and Sunday, traders were focused on geopolitical uncertainty. That focus quickly shifted midweek after Jerome Powell signaled that interest rates could stay higher for longer, giving the market another reason to sell. Together, these events were enough to clean most of the leverage out of the market and send funding rates to near zero in BTC and ETH. While lower leverage is constructive for the market, we are heading into a seasonally tough period – whether prices can form a base here remains to be seen. Our desk saw mixed flows in the majors and altcoin sectors. 

Trading volumes on Coinbase platform (USD)

Screenshot 2024-04-18 at 6.01.47 PM

Trading volumes on Coinbase platform by asset

Screenshot 2024-04-18 at 6.02.13 PM

Financing Rates







5.00% - 10.75%


USD - 1m


5.25% - 11.00%

USD - 6m


5.50% - 11.50%


1.50% - 5.00%


3.00% - 8.00%


Notable Crypto News


  • Web3 investment up 55% in Q1 as crypto VC interest rebounds (CoinTelegraph)
  • Hong Kong spot bitcoin ETFs could go live as soon as this month (The Block)


  • Tether, Circle Diverge on How to Tackle Global Patchwork of Stablecoin Rules (Coindesk)


  • Runes Will Help Bitcoin DeFi ‘Close the Gap’ on Ethereum, Solana (Decrypt)


  • Coinbase Derivatives has successfully launched Bitcoin Cash and Litecoin futures contracts as it gears up to launch Dogecoin futures later this month (Coinbase Blog)

Views From Around the World


EU's MiCA Rules Have Had Little Influence on the European Crypto Market, Regulator Says (Coindesk)

The UK will enact new legislation on stablecoins and cryptocurrency staking, trading and custody by June or July this year. (Coindesk)

Landesbank Baden-Württemberg, Germany’s biggest federal bank, plans to start offering cryptocurrency custody services in partnership with the Bitpanda exchange (Bloomberg)

Barclays, Citi Are Among Banks Testing Tokenized Deposits in UK (Bloomberg)


Hong Kong approves first batch of spot bitcoin, ether ETFs in drive to become crypto hub (The Block)

Hong Kong-Based First Digital's $3B Stablecoin Arrives to Sui Network in DeFi Push (Coindesk)

Australians wouldn’t value retail CBDC for its privacy or safety, RBA finds (Cointelegraph)

Vietnamese Justice Ministry Official: Vietnam Has Not Banned Cryptocurrencies, Calls for Legal Framework (VNExpress)

The Week Ahead

April 22

April 23

April 24

April  25

April 26

Notable Macro

US Durable Goods 


BoJ Policy Rate

US PCE UoM Consumer Sentiment

Notable Earnings

Tesla Inc

Meta Platforms 

Microsoft Corp

Alphabet Inc


US Crypto Futures Expiry


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