The crypto market is buzzing with optimism as traders gear up for Wednesday’s Federal Reserve interest-rate decision. Anticipation is rife that the Fed may decide to cut rates by 25 basis points, a move that many believe would favor risk assets like Bitcoin. Currently, Bitcoin (BTC) is trading at around $92,300, having seen a 2.3% increase in the past 24 hours, while Ethereum (ETH) has outperformed, boasting a notable 7% gain and sitting at approximately $3,321.45.
Interest-rate announcements often stir volatility in trading sessions. A cut of 25 basis points could be perceived as a signal of support for riskier assets, but traders must also be wary of the potential for a market pullback. History has shown that post-announcement trading can be treacherous, particularly if traders decide to cash in on gains, leading to a drop in prices and trapping those in overpriced long positions.
Over the past week, Bitcoin has established a narrow trading range between $88,000 and $94,500. A decisive break above $94,500 or below $88,000 will likely signal the direction of future price movements, either continuing upward or signaling bearish trends.
Derivatives Positioning
- Volmex’s one-day Bitcoin implied volatility has surged to 67%, a sharp rise from 20%, indicating traders expect significant swings in the asset’s price.
- This recent spike implies an expected price swing of approximately 3.5% in the next 24 hours, suggesting that the Fed meeting may not lead to extreme volatility.
- Ethereum is forecasted to experience a 4.6% movement, while SOL and XRP are projected to fluctuate around 5%.
- Interestingly, BTC’s implied volatility structure is slightly inverted, suggesting traders are more concerned about near-term volatility than long-term stability. If the Fed’s decision fails to create the expected excitement, normalization could occur swiftly.
- Data from Deribit reveals that puts for both BTC and ETH are trading at a premium compared to calls, with recent trading activity indicating a preference for ETH strangles and straddles—trades designed to capitalize on volatility.
- In the futures market, open interest (OI) has obviously ramped up across major tokens, particularly ether, which has increased by 8% to reach 12.4 million ETH, a level not seen since early December.
- Cardano’s OI has also risen, briefly hitting 1.80 billion ADA, its peak since October 10, before settling back to approximately 1.71 billion ADA.
- Conversely, BCH, XMR, and WLFI are experiencing deeply negative annualized funding rates, indicating a market sentiment leaning towards bearish positions.
- On the CME, ether futures OI has exceeded 2 million ETH, while BTC positioning remains low compared to previous months.
Token Talk
- Notably, while Ethereum garners attention post-Fusaka upgrade, the broader altcoin market has been lagging significantly.
- CoinMarketCap’s altcoin season indicator currently sits at just 16 out of 100, a dramatic drop from September’s reading of 78/100, indicating traders are wary of venturing outside of established tokens.
- This trend may stem from a preference for larger market cap tokens like Bitcoin and Ethereum, which offer more liquidity and lower volatility as traders seek comfort ahead of the interest-rate decision.
- In the past week, derivatives token HYPE has struggled, declining by 15%, while other tokens like STRK, KAS, and APT have also faced significant setbacks.
- Conversely, FET, an AI-focused token, has seen a resurgence, rallying by 9.3% in the last 24 hours, though it remains deeply deflated on longer time frames, having lost over 80% year-to-date.
