Bitcoin rebounds from midterm dip as DeFi leads gains

Bitcoin rose around 1.3% to $78,300 since midnight UTC, recovering from a dip to around $75,600 near 03:00 UTC on Wednesday. The altcoin market also showed strength, with ether gaining 2% and the CoinDesk 80 Index advancing 2.3%.

CoinDesk’s DeFi Select Index (DFX) was the strongest performer, rising by around 5% with the likes of injective posting a 6.2% gain.

The initial dip in bitcoin came as U.S. midterm results showed Democrats winning control of Congress, coinciding with fresh questions over crypto legislation. Stock futures turned positive early Wednesday after earlier losses, while bitcoin recovered.

Traders now look to Friday’s U.S. jobs report.

Derivatives positioning

• Market-wide futures: Volume rose 27% in 24 hours while open interest (OI) rose only 3%. So most of the activity was traders moving in and out of positions, with a modest amount of fresh money coming in. Liquidations rose 22% to $469 million. The taker volume ratio, which tracks market orders, flipped to a small buy lean at 51.6% versus 48.4%. Yesterday it was over 51% sell.
• ZEC surge: ZEC open interest jumped 25% against a 14% price gain. It grew faster than price, so fresh money came in. Market-order buying was the strongest of any coin, and funding is positive, which means longs pay shorts, indicating a bullish bias.
• NEAR rally lacks OI support: NEAR rose about 7%, but open interest barely moved, up 0.35%. The rally is not backed by new positions. It had the second-strongest market-order buying, and funding is positive, so longs pay shorts.
• ETH over BTC: BTC open interest rose 1.6% against a 2.1% price gain. Meanwhile, ETH open interest rose 4.2% against a 2.7% price gain, so money came in. Both coins saw volume jump about 37% to 40%. Funding is positive on both, so longs pay shorts.
• Funding rates: Most coins are mildly positive, so longs are paying shorts across the market. XMR and BCH stand out with their negative rates, which point to bear dominance.
• Mixed CVD: OI-normalized cumulative volume delta (CVD), which tracks market-order buying and selling, is mixed. LINK (Chainlink) is the most negative. Most coins saw market-order selling during the early drop, and much of it has since reversed.
• Options calm: Bitcoin's one-week implied volatility, the price swings options traders expect, fell from about 41% to about 34% since the early-morning spike. The pre-election bump in near-term options has deflated. Skew, the extra premium paid for puts over calls, spiked to about 19% during the dip. It has fallen back to near where it started the day, so demand for downside protection has faded.
• Calls versus puts: Four of bitcoin's six most active options contracts are calls, led by the Dec. 25 $88,000 call and the Nov. 7 $78,000 call. Ether is the reverse, with four of six being puts,

Token talk

• Venice token , the token of the AI platform Venice, led the CoinDesk 100 gainers, rising around 7% since midnight UTC. It has gained around 17% over 24 hours. Grass , bonk , near and morpho each rose around 6%, while zcash (ZEC) gained 5% and is up 12% over 24 hours.
• Decentralized finance tokens drove much of the strength, with all seven of the DeFi Select members higher, led by injective and ethena (ENA).
• Pepe and bonk gained around 5% and 6%, outpacing the CoinDesk Memecoin Index’s 1.1% advance.
• Trump-linked tokens lagged. The official trump token (TRUMP) fell 7.1% and world liberty financial lost 5%, coinciding with the Democratic wins. Trump Media shares were down 6.5% in premarket trading.
• The CoinMarketCap fear and greed index stood at 37, in fear territory, and its altcoin season index at 51.