Two Bitcoin Price Points Experienced Traders Are Monitoring Closely

Bitcoin traders are watching two critical price points as U.S. Federal Reserve Chairman Jerome Powell gears up to present his eagerly awaited speech at Jackson Hole this Friday.

The options market is providing mixed signals, indicating a defensive stance while there is a possibility of another rally in the latter half of this year.

A negative 25 Delta Skew reveals that traders are opting for more expensive call options—or the opportunity to purchase at a specified strike price—indicating a bullish inclination.

Nevertheless, it’s important to highlight that the Skew has slightly decreased in the past 24 hours, indicating a reduction in traders willing to invest capital to maintain their positions prior to Friday’s event.

Bitcoin has fallen by almost 5% over the past week, trading near a two-week low at $113,000, according to CoinGecko. 

This careful adjustment aligns with last week’s market correction, following reduced expectations for rate cuts based on disappointing producer data and escalating core inflation.

“The risk surrounding the event is significant as Fed Chair Powell prepares for his remarks at Jackson Hole,” James Toledano, Chief Operating Officer at Unity Wallet, shared with Decrypt via email. 

“Volatility positioning is likely to remain cautious throughout the speech, potentially followed by renewed clarity or consistency afterward,” Toledano noted.

There is currently a significant volume and open interest for Bitcoin options centered around the $110,000 and $120,000 strikes, indicating key zones of demand and supply, Deribit data indicates.

High stakes

Powell’s speech on Friday carries great importance, especially with increasing pressure from Washington to decrease interest rates to as low as 1%.

The CME FedWatch Tool estimates the likelihood of a quarter-point rate cut in September at 75%, which would adjust the federal funds rate to a target range of 4% to 4.25%

These odds have decreased by over 15% since the latest producer price index data was released last week.

The most probable outcome from Friday is still a “kind of technocratic grey,” Haonan Li, CEO of Codex, a cryptocurrency infrastructure firm backed by Circle and Coinbase, mentioned to Decrypt.

Li, a former head of cryptoeconomics at OP Labs and ex-investment analyst at Oak Hill Advisors, anticipates Powell to adopt a neutral, data-driven tone without committing to a September rate cut.

Options analysts previously consulted by Decrypt share this perspective, indicating institutions are not overly optimistic about the meeting.

This could pose challenges for short-term investors who bought the leading cryptocurrency in the last 30, 60, and 90 days. This group is now holding their investments at either a loss or just breakeven, Santiment data reveals. 

Li warns that if the market consensus regarding a rate cut is inaccurate, “risk assets like Bitcoin and Ethereum will decline.”