The cryptocurrency market is experiencing a positive outlook as we approach Wednesday’s Federal Reserve interest rate decision.
The prevailing consensus is that the Fed will reduce rates by 25 basis points, a development anticipated to benefit risk assets such as bitcoin .
BTC is currently valued at $92,300, having increased by 2.3% in the last 24 hours. Ether has outperformed bitcoin with a 7% increase.
Interest rate announcements typically lead to volatile trading periods, and while a 25 bps reduction may be viewed as bullish, there’s a possibility that traders might believe further gains are improbable and opt to sell upon the news, potentially decreasing prices and trapping others in overvalued long positions.
Bitcoin has established a trading range between $88,000 and $94,500 over the past week. A break below or above these thresholds will signal the direction of future price movements.
Derivative Strategies
- Volmex’s one-day bitcoin implied volatility surged from 20% to 67%.
- The latest figure suggests an anticipated 24-hour price fluctuation of 3.5%, which is now atypical. This implies the Fed meeting isn’t expected to significantly affect the market.
- ETH anticipates a 4.6% movement, with SOL and XRP estimated at 5%.
- BTC’s options-based implied volatility term structure has a slight inversion, with near-term volatility being more expensive than long-term volatility. If the Fed’s outcome is lackluster, the curve could swiftly revert to normal.
- On Deribit, BTC and ETH puts are trading at a premium compared to calls. Recent block trading activity included ETH strangles and straddles, indicating traders positioning for increased volatility. For BTC, traders focused on risk reversals.
- In futures, open interest (OI) has risen across most major tokens, with ether climbing 8% to 12.4 million ETH, a level not witnessed since December 2.
- Cardano’s open interest briefly peaked at 1.80 billion ADA, the highest since October 10, and recently settled at 1.71 billion ADA.
- BCH, XMR, and WLFI have significantly negative annualized funding rates, indicating traders are pursuing bearish, short positions.
- On the CME, OI in ether futures has exceeded 2 million ETH, while BTC positioning remains at multi-month lows.
Token Insights
- Aside from ether, which is garnering interest following last week’s Fusaka upgrade, the altcoin market is lagging.
- CoinMarketCap’s “altcoin season” metric is registering a low of 16/100, a stark contrast to September’s score of 78/100.
- This could be attributed to traders favoring larger-cap tokens like bitcoin and ether due to their higher liquidity and lower volatility leading up to events like the U.S. interest rate decision.
- In the past week, the derivatives token HYPE has been one of the poorest performers, losing 15% of its value. STRK, KAS, and APT have also experienced substantial declines.
- The AI-centric token FET was among the top gainers in the last 24 hours, surging by 9.3% as it rebounds from a recent downturn. However, it remains heavily depreciated over longer time frames, having lost 1.6% in the past week, contributing to a year-to-date decline exceeding 80%.
