Bitcoin (BTC) surged to its highest level since August 22 on Wednesday, hitting $117,300 before settling at $116,400.
Much of the enthusiasm on Wednesday is still pending, dependent on the Federal Reserve’s interest-rate decision at 18:00 UTC and the following press conference. A 25 basis point rate cut is anticipated,
The initial movement was noteworthy as it coincided with a significant “CME gap,” the difference between bitcoin futures’ closing on Friday and opening on Sunday.
With that gap now addressed, bitcoin might begin consolidating in a range above critical support levels at $110,000, likely resulting in increased capital flow into altcoins.
As indicated by CoinMarketCap data, bitcoin’s dominance has decreased to 57%, marking its lowest level since January, implying a shift towards speculative altcoin investments during this period of low volatility.
Derivatives Positioning
- BTC futures open interest across major platforms has risen to $32 billion over the last week.
- Simultaneously, the three-month annualized basis has started to compress again to about 6-7% across Binance, OKX, and Deribit, making the carry trade only slightly profitable.
- While the increase in open interest suggests a rise in market activity and engagement, the narrowing basis reflects a weakening directional conviction, particularly on the bullish side, as traders are less inclined to pay a high premium for future exposure.
- The options data also reveals a complex sentiment landscape.
- Despite the BTC Implied Volatility Term Structure chart indicating an upward-sloping curve, signifying expectations of higher long-term volatility, other indicators suggest a more immediate bearish sentiment.
- The 25 delta skew chart notably illustrates that the skew is either flat or slightly negative for shorter-term options (1-week, 1-month), indicating traders are paying a premium for puts over calls to hedge against potential declines.
- This short-term bearish sentiment is directly contradicted by the 24-hour put-call volume chart, showing a greater volume of calls than puts, suggesting that most options traders have been positioning for a price increase over the last day.
- Funding rate APRs across major perpetual swap platforms have recently begun to increase, with BTC annualized funding currently at 17%.
- If this uptrend continues and is supported by other platforms, funding rates would imply growing conviction in a directional, more bullish outlook for prices.
Token Talk
By Oliver Knight
- Bitcoin (BTC) remains stubbornly within a tight range, inching up to $116,000 over the past 24 hours but lacking the momentum for a breakout.
- Altcoins are benefitting from this volatility vacuum, with multiple spikes contributing to a decline in bitcoin dominance to an eight-month low of 57%, per CoinMarketCap data.
- Dominance serves as a metric to evaluate whether capital is moving into bitcoin or more speculative altcoins, which appears to be the case currently.
- Another positive signal for altcoins is that the average crypto token RSI sits at 45.47, indicating that altcoins are entering “oversold” territory rather than “overbought,” suggesting potential for upward movement.
- It’s essential to remember that bitcoin dominance plunged to 33% in 2017 and 40% in 2021, indicating that altcoins have further potential for growth.
- The future largely hinges on bitcoin’s behavior if it approaches record highs at $124,000. A breakout on strong volume could facilitate a capital shift back to the largest cryptocurrency, as investors seek to capitalize on a potential cycle high, with figures like Eric Trump calling for $175,000 before year-end.
