FED

BTC price clears $41K as Bitcoin digests US macro data on Fed FOMC day

Bitcoin traders eye BTC price levels of interest as the U.S. PPI preserves the declining inflation narrative ahead of the Fed’s rates decision.

Bitcoin (BTC) recovered above $41,000 at the Dec. 13 Wall Street open as eyes focused on the United States Federal Reserve.

Data from Cointelegraph Markets Pro and TradingView showed BTC price strength gaining momentum on the latest U.S. macro data releases.

November’s Producer Price Index (PPI) print came in below expectations, further bolstering the extant narrative of declining inflation. The Consumer Price Index (CPI) print, while less encouraging, did not induce fresh pain for risk assets.

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$300M crypto long liquidations — 5 things to know in Bitcoin this week

BTC price action obliterates latecomers betting on continued upside as Bitcoin analysts and miners breathe a sigh of relief.

Bitcoin (BTC) starts a key week for macro markets with a bump as the weekly close gives way to a sharp 7% BTC price correction.

The largest cryptocurrency broke down toward $40,000 in a fresh bout of volatility, reaching its lowest level in a week.

Arguably long overdue, Bitcoin’s return to test support nonetheless caught bullish latecomers by surprise, liquidating almost $100 million in longs.

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Bitcoin derivatives data shows bulls positioning for further BTC price upside

BTC price continues to show strength, and derivatives data suggests that bulls intend to press Bitcoin higher.

Bitcoin (BTC) price maintained the $30,000 support as lower-than-expected U.S. Consumer Price Index (CPI) data was released on April 12. The official inflation rate for March increased 5% year on year, which was slightly less than the 5.1% consensus. It was the lowest reading since May 2021 but is still significantly higher than the U.S. Federal Reserve’s 2% target.

The data suggests that inflation is no longer the driving force behind Bitcoin’s rally, and investors’ focus has shifted from the impact of inflationary pressure to potential recession risks after the banking crisis revealed how fragile the financial system was following the Federal Reserve’s 12-month hike in interest rates from 0.10% to 4.85%.

Aside from the Silicon Valley Bank bankruptcy and the government-backed sale of Credit Suisse to UBS, several warning signs of a macroeconomic downturn have emerged.

The most recent ISM Purchasing Managers Index data fell to its lowest level since May 2020, indicating an economic contraction. According to Federal Reserve documents released on April 12, the aftermath of the U.S. banking crisis is likely to push the economy into a “mild recession” later this year. Because of the crisis, some have speculated that the Fed will hold off on raising interest rates, but officials affirmed that more effort is needed to keep inflation under control.

According to a Moody’s Analytics report, commercial real estate prices fell 1.6% in February, the most since the 2008 financial crisis. Furthermore, the national office vacancy rate reached 16.5%, indicating the severity of the economic difficulties that businesses are currently facing.

Whatever the reason for Bitcoin’s 50% rally between March 11 and April 11, it demonstrates resilience to FUD — fear, uncertainty and doubt — including the Securities and Exchange Commission’s Wells notice against Coinbase on March 22 and the Commodity Futures Trading Commission filing a suit against Binance and its CEO, Changpeng Zhao, on March 27. By holding the $30,000 support, Bitcoin demonstrates that the positive momentum can continue regardless of whether inflation remains above 5%.

Bulls are better positioned for the weekly BTC options expiry

Not everyone is cheering the rally, particularly traders who have placed bearish bets using Bitcoin options. The April 14 open interest for BTC options expiry is $950 million, with $490 million in call (buy) options and $460 million in put (sell) options. Bears have been caught off guard, with less than 7% of their bets exceeding $29,000.

Bitcoin options aggregate open interest for April 14. Source: CoinGlass

Below are the four most likely scenarios based on the current price action. The number of call (buy) and put (sell) options contracts available on April 14 varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $28,000 and $29,000: 2,600 calls vs. 1,800 puts. The net result is balanced between call and put options.
  • Between $29,000 and $30,000: 6,700 calls vs. 500 puts. The net result favors the call (buy) instruments by $110 million.
  • Between $30,000 and $30,500: 8,500 calls vs. 200 puts. Bulls increase their advantage to $250 million.
  • Between $30,500 and $31,500: 11,300 calls vs. 100 puts. Bulls’ advantage increases to $350 million.

This rough estimate considers only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies. A trader, for example, could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but this effect is difficult to estimate.

Related: Bitcoin-friendly PPI data boosts bulls as Ether price fights for $2K

Bears are unlikely to reverse their situation

Bulls are expected to push Bitcoin above $30,500 on April 14 at 8:00 am UTC to profit an additional $100 million. Bears, on the other hand, would need to pressure Bitcoin’s price below $29,000 in order to balance the scales. However, bears recently suffered significant losses as BTC futures short contracts were forcibly liquidated to the tune of $128 million between April 9 and April 11.

As the most likely scenario favors Bitcoin bulls, their profits will most likely be used to reinforce the $30,000 support. Bears might consider licking their wounds and waiting for additional actions from regulators, as the macroeconomic scenario is currently bullish for supply-capped assets.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Fed liquidity injections drive down US Treasury yields, but not Bitcoin price

Regulatory uncertainty and the recent enforcement actions taken against major crypto exchanges reduces the odds of Bitcoin breaking above $30,000 in the short-term, but investors are still bullish.

Bitcoin (BTC) might have shown strength after successfully defending the $28,000 support amid unfounded rumors regarding Binance, but an interesting development to note is BTC is becoming less correlated to traditional markets after the United States Federal Reserve elected to provide emergency liquidity to banks. 

This change in attitude from the central bank has caused a shift in the trajectory of U.S. Treasurys as traders sought refuge from the inflationary upward pressure. Bitcoin appears to be agnostic to the movement and its price has been hovering around $28,000 for the past week.

Meanwhile, the yield on the five-year note fell to 3.50% on April 3, a drop from 3.70% in the previous week. Higher demand for debt instruments reduces payout, resulting in a lower yield. The $152.6 billion in outstanding borrowings from the U.S. Federal Reserve’s backstop lending program has been the driving factor.

The general public’s lack of trust in banks has also caused them to reconsider what the Federal Deposit Insurance Corporation is and how the Fed no longer controls the inflation trajectory. The question of whether Bitcoin can serve as a reliable store of value during a crisis remains open, but the 70% year-to-date gains certainly demonstrate a point.

Investors are reducing their cash positions

According to data from Bank of America, the total assets of money market funds in the United States reached a record high of $5.1 trillion. These instruments invest in short-term debt securities such as the U.S. Treasurys, certificates of deposit and commercial paper. Furthermore, fund manager and analyst Genevieve Roch-Decter states that investors have withdrawn $1 trillion from banks because money market funds offer a much higher return.

Even though Bitcoin investors view cryptocurrencies as a safe haven against inflation, a recession would reduce demand for goods and services, resulting in deflation. The risk increased substantially after the March U.S. ISM Purchasing Managers Index data was released. At 46.3, the indicator reached its lowest level since May 2020, below analysts’ forecast of 47.5, indicating contraction.

According to Jim Bianco, macro analyst at Bianco Research, this was the 16th time since 1948 that the level had reached such a low point, and in 75% of those instances, a recession followed.

Let’s examine Bitcoin derivatives metrics to determine the current market position of professional traders.

Bitcoin derivatives traders did not fold under the FUD

Bitcoin quarterly futures are popular among whales and arbitrage desks, which typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement for a longer period.

As a result, futures contracts on healthy markets should trade at a 5% to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

Bitcoin 2-month futures annualized premium. Source: Laevitas

Since March 30, the Bitcoin futures premium has been hovering near the neutral-to-bearish threshold, indicating that professional traders are unwilling to turn bullish despite the BTC price remaining near $28,000.

The absence of demand for leverage longs does not always imply a price decline. As a result, traders should investigate Bitcoin’s options markets to learn how whales and market makers value the likelihood of future price movements.

The 25% delta skew indicates when market makers and arbitrage desks overcharge for upside or downside protection. In bear markets, options traders increase their odds of a price drop, causing the skew indicator to rise above 8%. Bullish markets, on the other hand, tend to drive the skew metric below -8%, indicating that bearish put options are in less demand.

Related: Bitcoin price bounces after CZ arrest rumors as traders eye $30K next

Bitcoin 60-day options 25% delta skew: Source: Laevitas

The 25% skew ratio is currently at -5 because protective put options are trading slightly cheaper than neutral-to-bullish calls. That is a bullish indicator, given the recent FUD generated after the Commodities Futures Trading Commission sued Binance on March 27. The regulator alleges that Binance and CZ violated regulatory compliance and derivatives laws by offering trading to U.S. customers without registering with market regulators.

So far, Bitcoin has held up well as the baking sector forced the Fed to reverse its credit-tightening policy. However, as long as regulatory uncertainty surrounds major crypto exchanges, Bitcoin is unlikely to break above $30,000.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

3 reasons why Bitcoin bulls are well positioned to profit from this week’s $4.2B options expiry

$4.2 billion in BTC options expire on March 31, and despite weeks of harsh regulatory action against the crypto sector, bulls are well positioned to profit.

Regulation continues to be the primary concern for Bitcoin bulls, especially after the Commodity Futures Trading Commission (CFTC) sued Binance for trading and derivatives law violations. The regulator wants Binance to repay the trading profits, revenues, salaries, commissions, loans and fees it received from United States citizens, as well as paying civil penalties for the violations.

Bitcoin’s (BTC) rise was also fueled by a shift in sentiment toward risk assets after U.S. Federal Reserve Chair Jerome Powell said interest rate hikes are no longer the default move to curb inflation. The central bank understood that the current situation will likely “result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes.”

Fixed-income investors earn more when interest rates rise, so buying stocks and commodities becomes less appealing. As a result, by reversing the strategy and adding $339 billion in liabilities in two weeks, the Fed chose to contain the banking crisis, which may cause inflation to spiral out of control.

Given the accretive scenario for risk assets, Bitcoin bulls can profit up to $1.4 billion in Friday’s monthly options expiry.

Bitcoin bears were caught completely off-guard

The open interest for the March 31 options expiry is $4.2 billion, but the actual figure will be lower since bears were expecting sub-$26,500 price levels. These traders were caught by surprise as Bitcoin gained 32% between March 12 and March 17.

Bitcoin options aggregate open interest for March 31. Source: CoinGlass

The 1.34 call-to-put ratio reflects the imbalance between the $2.4 billion call (buy) open interest and the $1.8 billion put (sell) options. However, if Bitcoin’s price remains near $28,000 at 8:00 am UTC on March 31, only $25 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $26,000 or $27,000 is useless if BTC trades above that level on expiry.

Bulls aim for $29,000 to secure a record-breaking $1.4 billion profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 31 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $25,000 and $26,000: 27,200 calls vs. 12,700 puts. The net result favors the call (bull) instruments by $360 million.
  • Between $26,000 and $27,000: 32,300 calls vs. 8,500 puts. The net result favors the call (bull) instruments by $620 million.
  • Between $27,000 and $28,000: 38,100 calls vs. 3,000 puts. Bulls increase their advantage to $1.2 billion.
  • Between $28,000 and $30,000: 48,300 calls vs. 400 puts. Bulls dominate by profiting $1.4 billion.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

For example, a trader could have sold a call option, effectively gaining negative exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.

Related: ‘Definitely not bullish’ — 7% Bitcoin price gains fail to convince traders

The bears best hope relies on regulatory FUD

Bitcoin bulls must push the price above $29,000 by March 31 to secure a potential $1.4 billion profit. Bear’s best shot, on the other hand, is more regulatory FUD about stablecoins or major crypto exchanges — which has so far been fruitless.

Considering the bullish momentum created by the Fed’s inability to continue raising interest rates, bulls are well positioned for the March BTC monthly options expiry. Most likely, those profits will be used to further strengthen the $28,000 support, so the expected outcome is especially concerning for bears.

Bitcoin has been hovering around $28,000 for the past ten days, but the cryptocurrency has gained 70.5% year to date. Until March 17, Bitcoin was trading below $25,000 and this explains why most bearish bets for March’s $4.2 billion options expiry were placed at $26,500 or lower.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Crypto market rally stalls at the $1.2T level, but bulls are getting positioned

The total crypto market cap has stalled at the $1.2 trillion level, but derivatives data shows bulls are preparing for the next breakout.

After gaining 11% between March 16 and March 18, the total crypto market capitalization has been battling resistance at the $1.2 trillion level. This same level was reached on August 14, 2022 and was followed by a 19.7% decline to $960 billion over the next two weeks. During the lateralization period between March 20 and March 27, Bitcoin (BTC) gained 0.3% while Ether (ETH) posted modest gains of 1.6%.

Total crypto market cap in USD, 12-hour. Source: TradingView

One source of favorable short-term momentum is a change in the Federal Reserve’s monetary policy. The U.S. Federal Reserve was forced to increase its balance sheet by $393 billion between March 9 and March 23 in order to provide short-term loans to failing banks. The objective of the plan was to reduce inflation, which has significantly impacted the cost of living and ultimately hampered economic expansion in the United States.

The balance sheet reduction runs counter to the central bank’s previous nine-month trend of offloading some of its debt instruments, exchange-traded funds and mortgage-backed securities. The reversion of this strategy is initially bullish for risk assets because the Fed is acting as a lifeline for struggling banks and hedge funds.

On the other hand, the sector’s regulatory risks were exacerbated on March 22 when Coinbase received a Wells notice from the U.S. Securities and Exchange Commission. The exchange’s staking program, some of its digital asset listings and its wallet services could all be targeted by the regulator. Again, the uncertainty stems from not knowing which assets qualify as securities.

These competing forces may have been the primary reason for cryptocurrencies’ narrow trading range near $1.18 trillion between March 17 and March 27. However, derivatives data presents compelling arguments for a rally toward $1.35 trillion and a retest of the $1 trillion threshold.

The total crypto market capitalization has remained stable since March 20, with XRP (XRP) rallying 22% and Litecoin (LTC) gaining 17%. XRP’s gains are likely attributable to investors’ expectations that Ripple will prevail in its ongoing legal battle against the SEC. As for Litecoin, analysts point to its upcoming halving in August, when the rewards for mining new blocks will be cut in half.

Options traders are reasonably confident above $1 trillion

Traders can gauge the market’s sentiment by measuring whether more activity is going through call (buy) options or put (sell) options. Generally speaking, call options are used for bullish strategies, whereas put options are for bearish ones.

A put-to-call ratio of 0.70 indicates that put option open interest lags behind the greater number of call options. In contrast, a 1.40 indicator favors put options, which is a bearish sign.

BTC options volume put-to-call ratio. Source: Laevitas

Since March 10, Bitcoin’s put-to-call ratio has been either balanced or favoring neutral-to-bullish call options. Even though Bitcoin’s price has risen by 41% in the past two weeks, options traders indicate they are not increasingly concerned about a price correction.

Related: Will BTC ditch the bear market? 5 things to know in Bitcoin this week

Leverage demand is balanced despite the resistance at $1.2 trillion

Perpetual contracts, also known as inverse swaps, have an embedded rate that is usually charged every eight hours. Exchanges use this fee to avoid exchange risk imbalances.

A positive funding rate indicates that longs (buyers) demand more leverage. However, the opposite situation occurs when shorts (sellers) require additional leverage, causing the funding rate to turn negative.

Perpetual futures accumulated 7-day funding rate on March 27. Source: Coinglass

In the past week, the seven-day funding rate for the majority of the leading cryptocurrencies has been neutral, indicating that no excessive buying leverage has been used to support prices. This translates to firepower for bulls, if necessary, and a significant reduction in liquidation risks.

The only exception was BNB (BNB), where short sellers paid 1.25% per week to maintain their positions. Regulatory uncertainty surrounding the Binance exchange is likely behind whales’ interest in shorting BNB.

The recent rally appears sustainable from a derivative perspective, and bulls are well positioned to defend against future declines. However, given that the crypto price gains may have been fueled by the Fed’s emergency action to avoid a banking crisis, the odds favor further lateral price movement.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin corrects on Fed rate hike, but bulls are prepared for Friday’s $1.2B options expiry

BTC price dropped as the Fed rolled out a 0.25% rate hike, but improving housing market data and Bitcoin options data suggests that bulls are ready for this week’s expiry.

Bitcoin’s (BTC) 17.5% rally between March 16 and 22 surprised options traders betting on price levels below $26,000. The movement resulted from investors seeking protection against persistent inflation and the ongoing banking crisis.

Bitcoin bulls have been paying close attention to the negative effects of near-zero interest rates between April 2020 and April 2022, and some have used the information to profit from the $1.2 billion in BTC options that are set to expire on March 24.

Resilient inflation and improving housing markets

According to the official Consumer Price Index (CPI) released on March 22, Inflation in England unexpectedly increased to 10.4% in February due to higher food prices. This outcome is likely to prompt the Bank of England to raise interest rates on March 23, thereby increasing the likelihood of a recession. A higher cost of capital is detrimental to businesses and families, but it is the only way to stem the rise in consumer prices.

Meanwhile, existing home sales in the United States increased 14.5% in February, following the first annual price decline in over a decade. The numbers released on March 21 reflect the decrease in mortgage rates resulting from the increased demand for government bonds. In addition, the increase in sales suggests that the housing market has reached a price floor.

Investors frantically sought protection against monetary debasement as governments were forced to inject capital to prevent banking sector contagion. For example, the yield on five-year U.S. Treasurys decreased from 4.34% on March 8 to 3.6% on March 22, indicating increased demand for fixed-income instruments.

Is the new world one where the prices of all assets are rising?

Consumer prices continue to rise even as the S&P 500 reclaimed the 4,000 mark. Housing market demand is increasing, and gold gained 7.8% in 2023. Every asset with a chance to profit from inflation is increasing, a typical sign of fiat currency debasement.

The movement is not consistent with the macroeconomic scenario in which banks required emergency bailouts and major corporations were forced to lay off thousands of employees due to declining sales prospects. Therefore, a portion of Bitcoin’s recent gains toward $28,000 is due to the weakening U.S. dollar.

If the fear of a recession continues to have a negative impact on risk markets, Bitcoin may struggle to maintain the price levels necessary for bulls to earn $380 million or more by March 24 when weekly options expire.

Data also shows that bears were caught by surprise as Bitcoin surpassed $26,000

The weekly BTC options expiry has $1.2 billion in open interest, but the actual figure will be lower because bears have concentrated their bets on Bitcoin trading below $26,000.

Bitcoin options aggregate open interest for March 24. Source: CoinGlass

The 1.17 call-to-put ratio reflects the difference in open interest between the $675 million call (buy) options and the $575 million put (sell) options. Bears were caught off guard on March 17 when Bitcoin’s price surged above $26,000, so the likely outcome will be much lower than anticipated.

For instance, if Bitcoin’s price remains near $27,700 on March 24 at 8:00 am UTC, there will be only $21 million in put (sell) options. This distinction arises due to the fact that the right to sell Bitcoin at $26,000 or $27,000 is null if BTC trades above that price on the expiry date.

Related: Bitcoin price whipsaws as Fed says rate hikes may not be ‘appropriate’

The most likely outcomes favor bulls by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 24 for call (buy) and put (sell) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $25,000 and $26,000: 7,400 calls vs. 5,500 puts. The net result favors the call (buy) instruments by $50 million.
  • Between $26,000 and $27,000: 9,100 calls vs. 3,700 puts. The net result favors the call instruments by $140 million.
  • Between $27,000 and $28,000: 12,700 calls vs. 800 puts. Bulls increase their advantage to $330 million.
  • Between $28,000 and $29,000: 14,300 calls vs. 20 puts. Bulls’ advantage increases to $405 million.

This rough estimate considers only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies. A trader, for example, could have sold a put option, effectively gaining positive exposure to Bitcoin above a certain price, but this effect is difficult to estimate.

Bears can only reduce their losses, so they are likely to throw in the towel and concentrate on the $3.8 billion monthly expiry on March 31. However, based on the weekly options data, bulls are in a great position to profit at least $330 million.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

US Fed announces $25B in funding to backstop banks

The Federal Reserve established a funding program for banks, making $25 billion available to eligible firms in a bid to avoid further banking liquidity issues.

Hot on the heels of several United States bank collapses, the Federal Reserve Board has announced $25 billion worth of funding aimed at backstopping banks and other depository firms.

The funds would ensure that eligible banks would have enough liquidity to cover the needs of their customers during times of turmoil.

In a Mar. 12 statement, the Federal Reserve Board said it created a $25 billion Bank Term Funding Program (BTFP) offering loans of up to one year to “banks, savings associations, credit unions, and other eligible depository institutions.”

Eligible firms must pledge U.S. Treasurys, agency debt and mortgage-backed securities or other “qualifying assets” as collateral, which will be valued “at par” — the price at which the assets were issued.

The Fed added it would be an “additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”

It comes as Silicon Valley Bank (SVB) announced on Mar. 8 a significant sale of assets and stocks aimed at raising additional capital, which panicked depositors and triggered a run on the bank. 

Related: U.S. authorities preparing ‘material action’ to curb SVB contagion

The bank run contaminated the crypto space as stablecoin issuer Circle disclosed it had $3.3 billion in SVB, causing further panic and resulting in its stablecoin USD Coin (USDC) losing its peg to the U.S. dollar.

The new program comes on the same day the Fed announced that U.S. Treasury Secretary Janet Yellen approved actions for the Federal Deposit Insurance Corporation (FDIC) to make SVB depositors whole and that regulators closed New York-based Signature Bank, citing systemic risk.

US Fed to create new crypto team amid concerns about unregulated stablecoins

The Fed’s vice chair for supervision said that the central bank does not want to curb innovation but ensure that regulations protect households and the financial system.

The United States Federal Reserve is set to create a “specialized team of experts” to keep up with developments in the cryptocurrency industry, according to a Fed official, amid concerns from the central bank about “unregulated” stablecoins.

Speaking at the Peterson Institute for International Economics in Washington on March 9, Vice Chair for Supervision Michael Barr admitted that crypto could have a “transformative effect” on the financial system but added that “the benefits of innovation can only be realized if appropriate guardrails are in place.”

According to Barr, the new crypto team will help the Federal Reserve “learn from new developments and make sure we’re up to date on innovation in this sector.” He added:

“Innovation always comes quickly, but it takes time for consumers to become aware that they could both gain and lose money on new financial products.”

Meanwhile, Barr noted that regulation needs to be a “deliberative process” to ensure a balance is reached between over-regulation that “will stifle innovation” and under-regulation that “will allow for substantial harm to households and the financial system”

Related: Fed signals a sharp rate hike in March due to inflation — Here’s how Bitcoin traders can prepare

One subsect of crypto that Barr highlighted as a point of concern was stablecoins.

He said that the assets backing many stablecoins in circulation are illiquid, meaning that it can be difficult to liquidate them for cash when needed, arguing:

“This mismatch in value and liquidity is the recipe for a classic bank run.”

He believes that unless regulated by the Fed, any widespread adoption of stablecoins could put households, businesses and the broader economy at risk.

Caitlin Long, the CEO of Custodia Bank — which has consistently been rejected from joining the Federal Reserve System — pointed out the irony in the comments from Barr given her belief that Silvergate Bank collapsed due to liquidity issues arising from a bank run.

Long also pointed to the current issues facing Silicon Valley Bank, whose shares plummeted after a March 8 financial update disclosed that it sold $21 billion worth of its holdings at a $1.8 billion loss, prompting fears that it was forced to sell to free up capital.


Bitcoin bulls’ desire for a trend reversal could be obliterated by this week’s $565M options expiry

Significant headwinds continue to batter BTC, and this week’s options expiry is unlikely to provide any relief.

Bitcoin (BTC) fell below a four-day narrow trading range near $22,400 on March 7 following comments by United States Federal Reserve Chair Jerome Powell before the Senate Banking Committee. During the congressional appearance, the Fed chairman warned that he bank is prepared to tame inflation by pushing for more significant interest rate increases.

Powell added that “the ultimate level of interest rates is likely to be higher than previously anticipated” and that recent economic data was “stronger than expected.” These remarks significantly increased investors’ expectations of a 50 basis point interest rate hike on March 22, putting pressure on risk assets such as stocks, commodities and Bitcoin.

That movement could explain why the $565 million Bitcoin weekly options expiry on March 10 will almost certainly favor bears. Nonetheless, additional negative crypto market events might have also played a significant role.

Bitcoin from the Silk Road and Mt. Gox are on the move

The movement of multiple wallets linked to U.S. law enforcement seizures on March 8 added to the price pressure on Bitcoin investors. Over 50,000 Bitcoin worth $1.1 billion were transferred, according to data shared by on-chain analytics firm PeckShield.

Furthermore, 9,860 BTC were sent to Coinbase, raising concerns about the coins being sold on the open market. These wallets are directly linked to the former Silk Road darknet marketplace and were seized by law enforcement in November 2021.

Mt. Gox creditors have until March 10 to register and choose a method of compensation repayment. The movement is part of the 2018 rehabilitation plan, and creditors must choose between “early lump sum payment” and “final payment.”

It is unclear when creditors can expect to be paid in cryptocurrency or fiat currency, but estimates indicate that the final settlement could take several years.

As a result, Bitcoin’s price drop to $22,000 on March 8 effectively confirmed bears’ advantage on the March 10 options expiry.

Bulls placed far more bets, but most will be worthless

The March 10 options expiry has $565 million in open interest, but the actual figure will be lower because bulls have concentrated their bets on Bitcoin trading above $23,000.

Bitcoin options aggregate open interest for March 10. Source: CoinGlass

The 1.63 call-to-put ratio reflects the disparity in open interest between the $350 million call (buy) options and the $215 million put (sell) options. However, the expected outcome is likely to be much lower, as bulls were caught off guard when Bitcoin fell below $23,000 on March 3.

For example, if the price of Bitcoin remains near $22,100 at 8:00 am UTC on March 10, only $6 million in call (buy) options will be available. This difference occurs because the right to purchase Bitcoin at $22,500 or $24,000 is rendered null if BTC trades below that level on expiry.

Related: Bitcoin clings to $22K as US dollar strength rises to December levels — What’s next?

The most likely outcomes favor bears by a wide margin

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 10 for call (bull) and put (bear) instruments varies depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

  • Between $20,000 and $21,000: 0 calls vs. 7,200 puts. The net result favors the put (bear) instruments by $150 million.
  • Between $21,000 and $22,000: 100 calls vs. 5,000 puts. The net result favors the put (bear) instruments by $105 million.
  • Between $22,000 and $23,000: 1,400 calls vs. 1,900 puts. Bears have a modest advantage, profiting some $55 million.
  • Between $23,000 and $24,000: 4,600 calls vs. 600 puts. The net result favors the call (bull) instruments by $95 million.

This rough estimate takes into account only call options in bullish bets and put options in neutral-to-bearish trades. Nonetheless, this oversimplification excludes more complex investment strategies.

A trader, for example, could have sold a call option, effectively gaining negative exposure to Bitcoin above a certain price, but there is no easy way to estimate this effect.

To turn the tables and secure a potential $95 million profit, Bitcoin bulls must push the price above $23,000 on March 10. However, given the negative macroeconomic pressure and the FUD emanating from Mt. Gox and Silk Road, the odds favor bears in this week’s options expiry.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.