Amid the wave of risk aversion: Bitcoin struggles while safe-haven assets soar

The cryptocurrency market is going through a period of stagnation marked by widespread risk aversion. Bitcoin, once a driver of gains, is seeing its momentum weaken. As of January 29, BTC was trading at $84,040, down 6.11% over 24 hours, while Ethereum was trading at $2,800, suffering a 7.32% decline in the same time frame. At the same time, US stock indexes reflect this increased caution: the Nasdaq 100 and the S&P 500 gave up 0.4% and 0.25% respectively, confirming that risk aversion extends well beyond the world of cryptocurrencies.

Growing investor aversion: when precious metals shine

The signs of aversion are clearly manifested by the flight to safe haven assets. Gold and silver reached new highs this week, reflecting the defensive stance adopted by investors. This dynamic has its roots in growing geopolitical uncertainty: the trilateral talks between Ukraine, Russia and the United States have inspired only limited confidence in a quick resolution to the conflict.

This rush for safety reveals a reality in the current market: in the face of uncertainty, institutional investors favour havens of stability. Cryptocurrencies, perceived as risky and volatile assets, are therefore seeing their capital inflows slow down considerably. Crypto spot trading volumes plummeted from $1.7 trillion the previous year to just $900 million, a decline of more than 45% indicative of the markets’ renewed caution.

Crypto derivatives under pressure: massive sell-offs and capital flight

Risk aversion weighs heavily on the futures market. More than $200 million worth of positions were liquidated in 24 hours, with long positions making up the dominant share of these trader bankruptcies. This wave of sell-offs has been accelerating since the beginning of the week, as bulls were caught off guard by the price correction.

Bitcoin’s 30-day implied volatility index (BVIV) normalized to 40%, erasing Tuesday’s brief worries (44%). This decline reflects a sustained interest among investors in volatility selling strategies, particularly via hedged options, signalling some confidence in current levels despite the general aversion.

In terms of futures open interest, only Ethereum in the top 10 saw a slight 24-hour increase. Bitcoin, XRP, Solana, and other majors have all seen capital outflows, confirming the portfolio reallocation movement. The cumulative volume delta indicator shows a net buy on Tron, Zcash, and Bitcoin Cash, while Bitcoin and other major assets are under selling pressure.

Data from Deribit highlights an interesting divergence: short-term and near-to-maturity put options on Ethereum are trading at higher premiums than Bitcoin, revealing that traders are anticipating more pronounced volatility and taking a more bearish stance on Ethereum’s native token.

Altcoins in search of a rebound: ZRO leads despite low liquidity

Despite the overall weakness, the altcoin sector is showing some pockets of resistance. LayerZero’s ZRO token is down 3.59% over 24 hours, but traders are maintaining their appetite thanks to anticipations around a major update scheduled for early February. Tron (TRX) fell 0.20%, while Dash (DASH) plunged 9.92%, reflecting general secondary market turmoil.

A fundamental problem with potential rebounds is that liquidity has dried up. TON, for example, has a market depth (bid-ask spread) of just $580,000 to $700,000, which is just 2% of a $3.7 billion market cap. Such a lack of liquidity means that any large order risks destabilizing prices.

Paradoxically, this low volume also offers an opportunity: if the broader market engages in a rebound move, the absence of sell orders would create an amplification effect for altcoin gains. More savvy traders are therefore watching this delicate balance between risk aversion and catch-up opportunities.

The “altcoin season” index has risen from 24/100 to 29/100 over the past week, reflecting traders’ moderate efforts to make gains in an otherwise sluggish environment. CoinDesk’s Bitcoin Dominance Index (CD20) gave up about 0.6%, while the memecoins, DeFi, and metaverse sectors all showed a positive hue.

The metaverse token sector remains the most dynamic since the beginning of the year, with the CoinDesk Metaverse Select Index (MTVS) up 50% since January 1. Axie Infinity (AXS) is now trading at $2.16, and The Sandbox (SAND) is trading at $0.11, buoyed by the resilience of the collectible digital asset sector.

The emergence of Pudgy Penguins as one of the strongest NFT native brands in this cycle illustrates the evolution of strategies in the crypto ecosystem. The platform has moved beyond the speculative “digital luxury goods” model to become a multi-vertical IP platform, with retail sales exceeding $13 million and more than one million units sold. Its games (including Pudgy Party, which exceeded 500,000 downloads in two weeks) and its PENGU token airdropped to more than 6 million wallets demonstrate a well-thought-out onboarding strategy. However, the market is currently valuing Pudgy Penguins at a premium to its traditional IP counterparts, and sustained success will depend on execution in retail expansion, gaming adoption, and deepening the token’s utility.

Implications for investors: navigating a risk-off environment

Growing investor aversion is reshaping the crypto landscape. Bitcoin miners that have shifted their business model to AI infrastructure and high-performance computing continue to outperform, signaling that innovation and diversification remain key drivers despite the general dislike.

Market data paints a nuanced picture: prices are correcting and investors are becoming more cautious in the face of macroeconomic uncertainty. Nevertheless, the structure of the market — insufficient market depth, concentrated liquidity, compressed volatility — suggests that corrective movements could also quickly reverse once risk aversion dissipates. Investors who understand this dynamic will be better equipped to anticipate opportunities for a rebound.