Cryptocurrency market sentiment is buoyant ahead of Wednesday’s Federal Reserve interest rate decision.
The overwhelming expectation is that the Federal Reserve will cut interest rates by 25 basis points, a move seen as beneficial to risk assets such as Bitcoin .
BTC is trading at $92,300, up 2.3% in the past 24 hours. ether The increase exceeds that of Bitcoin by 7%.
Interest rate decisions often create volatility during the trading session, and while a 25 basis point cut may be viewed as bullish, there is also a scenario where traders believe further increases are unlikely and sell on the news, effectively driving down the price and trapping others in overpriced long positions.
Over the past week, Bitcoin has traded in a range between $88,000 and $94,500. A breakout of any of these levels would indicate the direction of future movement.
Derivatives positioning
- One-day Bitcoin implied volatility on Volmex climbed from 20% to 67%.
- The latest reading means that 24-hour price movement is expected to be 3.5%, which is now normal. This means that the Fed meeting will not have much impact on the market.
- ETH is expected to rise 4.6%, while SOL and XRP are expected to rise 5%.
- Bitcoin’s option-based implied volatility term structure is slightly inverted, with higher volatility on the front end than on the longer term. If the Fed’s decision proves to be a failure, the curve could normalize quickly.
- On Deribit, BTC and ETH put options remain more expensive than call options. Block traffic over the past 24 hours features ETH wide straddles and straddles, suggesting traders are bracing for volatility. For Bitcoin, traders chase risk reversals.
- On the futures front, most major coins saw an increase in open interest (OI), with Ethereum rising 8% to 12.4 million ETH, its highest level since December 2.
- Cardano open interest briefly rose to 1.8 billion ADA, the highest level since October 10, and recently rose to 1.71 billion ADA.
- BCH, XMR, WLFI have negative annualized funding rates, a sign of traders chasing bearish short positions.
- On CME, open interest in Ethereum futures has risen back above 2 million ETH, while BTC positions remain at multi-month lows.
token talk
- With the exception of Ethereum, which received attention following last week’s Fusaka upgrade, the altcoin market continues to lag.
- CoinMarketCap’s “Altcoin Season” indicator is showing 16/100, which is a cycle low and in stark contrast to September’s 78/100.
- One reason could be that traders prefer larger market cap coins like Bitcoin and Ethereum because there is greater liquidity and less volatility ahead of events such as U.S. interest rate decisions.
- Derivatives token HYPE was one of the worst-performing tokens over the past week, losing 15% in value. STRK, KAS and APT also posted double-digit losses.
- Artificial intelligence-focused token FET was one of the biggest gainers over the past 24 hours, rebounding from recent losses to rise 9.3%. Over the longer time frame, though, the index remains severely contracted, down 1.6% over the past week and more than 80% year-to-date.
