Bitcoin rose and fell, and the market lag effect caused altcoins to fall behind across the board

Over the past week, the crypto market has shown a stark “polarization”, which is a typical manifestation of the market lag effect. Bitcoin broke through $93,350 last Monday to hit a four-week high, but then quickly gave up gains; Meanwhile, altcoins continue to be under pressure, reflecting a lack of trader confidence and liquidity woes. As of the latest data, Bitcoin fell to $84,650, down 5.41% in 24 hours, while most altcoins fell even more sharply.

What does this market lag effect mean? Simply put, market participants are reacting to the good news out of sync - some traders are still on the sidelines, while others have already begun to take profits. This hesitant mentality directly leads to the depletion of liquidity and the selective withdrawal of funds.

BTC pulled back after hitting a four-week high, CME gap trading is seen in the real chapter

At midnight US time on Monday, coinciding with the opening of CME Bitcoin futures, Bitcoin surged to $93,350, the highest level since December 11. But this sharp rise left a seemingly “perfect” trading signal – a gap between $90,500 and $91,550.

The market has historically been expecting such gaps, because according to technical analysis, they are usually “filled” within a few days. This means that the price is likely to retrace back to around $90,500 at some point this week. However, this expectation itself also reflects the market’s lag effect – traders are placing follow-up bets on price action that has already occurred.

The derivatives market is a red light: long exposure is liquidated, options sentiment turns

The data in the derivatives market is even more worrying. In the past 24 hours, exchanges have liquidated $260 million worth of crypto leveraged futures positions, with bears accounting for the absolute majority. This shows that long positions that have been amplified by leverage are being hit relentlessly - traders who are betting on the continued price increase are caught off guard by the sudden pullback.

In the deeper derivatives market, open interest (OI) for Bitcoin and its related assets diverged within 24 hours. Open interest in BTC, BCH, XRP, and BNB increased by 2% to 5%, indicating that some traders are still doubling down; However, the open interest of Ethereum, Solana, Dogecoin, and Zcash remained flat or declined, reflecting a clear lack of risk appetite among investors.

Of particular note is that BTC’s annualized perpetual contract funding rate has exceeded 10%, a figure that means that bulls need to pay extremely high funding costs to maintain their exposure. In other words, the bulls in the market have become a minority, and the short-selling force is accumulating.

On the Deribit exchange, the preference for BTC put options has generally weakened, but traders are chasing calls at the $100,000 strike price - this contrast is another manifestation of the market lag effect: some people are preparing for a decline, while others are still dreaming of a price rush to $100,000.

Token performance is greatly divided: AI coins and meme coins collectively fell

Under the influence of the LAG effect, the differentiation of the altcoin market has reached an extreme. Last Monday, LIT (Lighter perpetual contract exchange token) and FET (AI focus token Artificial Superintelligence Alliance) rose 3.9% and 7.4% respectively, but this was just yesterday’s yellow flower - the latest data shows that LIT has fallen 6.78% and FET has fallen 6.72%.

Meme coins and metaverse tokens have a sadder time. Dogecoin (DOGE) fell 7.05%, Pepe Coin (PEPE) fell as much as 6.11%, and Zcash also fell 6.48%. The collective decline of these tokens is not a coincidence, but a lack of liquidity playing a direct role – when funds begin to withdraw, tokens lacking fundamental support always bear the brunt.

It is worth mentioning that among the top 20 cryptocurrencies (except BCH, BTC, BNB, XLM), the cumulative volume difference after adjusting for positions of other assets has been negative in the past 24 hours. This technical indicator shows bluntly: there is net selling pressure in the market. In other words, selling forces are continuing to weigh on the market.

The average cryptocurrency Relative Strength Index (RSI) is approaching 58 points, entering the “overbought” region on a technical scale. This signal often signals a potential correction in the short term, as profiteers are considering locking in gains.

Global assets have fallen, and risk appetite has subsided

The crypto market’s woes are not isolated. The Nasdaq index has fallen sharply by 1.5% recently, mainly due to the stock price of tech giant Microsoft plummeting more than 11% after releasing its fourth-quarter earnings report. Gold has experienced the same sharp fluctuations – once high above $5,600, it has now quickly fallen back to $5,200.

The simultaneous decline of these global assets reflects a clear signal: the market’s risk appetite is fading. The lag effect is manifested here: when global systemic risk factors emerge, traders’ reactions are often lagging - from full of confidence to panic flight, which will inevitably lead to violent price fluctuations.

The collision of liquidity dilemmas and trader psychology

Essentially, the core issue of it all is liquidity. Since the liquidation storm in October, liquidity in the crypto market has been slowly recovering. Although the market seems to be active on the surface, the actual liquidity is still insufficient. In this environment, any large transaction may cause sharp price fluctuations, and small funds are walking on thin ice.

The indecision of traders has further exacerbated the situation. When the market lag effect is obvious enough, participants will be caught in the dilemma of “whether to follow the trend or wait and see”. some people chose to follow the trend and were finally trapped; Others chose to wait and see, and now they can only regret watching the currency in their accounts fall all the way.

This is the truest portrayal of the market lag effect: the asynchronous flow of information, funds and emotions has created a situation where altcoins are left behind, long positions are liquidated, and risk appetite fades. To wait for a reversal, it may take more time for the market to fully digest these negatives.