FED

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

The U.S. Federal Reserve is set to roll out a fresh interest rate hike on March 22, and options traders could use this risk-averse strategy to generate profits.

Like it or not, for crypto investors, the U.S. Federal Reserve policy on interest rate hikes and high inflation is the single most relevant measure for gauging demand for risk assets. By increasing the cost of capital, the Fed boosts the profitability of fixed-income instruments, but this is detrimental to the stock market, real estate, commodities and cryptocurrencies.

One positive aspect of the Fed’s meetings is that they are scheduled well in advance, so Bitcoin (BTC) traders can prepare for those. Federal Reserve policy decisions historically cause extreme intraday volatility in risk assets, but traders can use derivatives instruments to yield optimal results as the Fed adjusts interest rates.

Another challenge for traders is they face pressure from Bitcoin being highly correlated to equities. For example, the 50-day correlation coefficient versus the S&P 500 futures has been running above 70% since Feb. 7. Although it does not state cause and consequence, it is evident that cryptocurrency investors are waiting for the direction of traditional markets.

It’s also possible that Bitcoin’s low emissions could prove to be a benefit as investors realize that the Fed is running out of options to curb inflation. By raising interest rates even further, it could cause the U.S. government’s debt repayments to spiral out of control and eventually surpass $1 trillion annually. This creates a huge incentive for Bitcoin bulls, but extreme caution is needed by those willing to make trades based on interest rate hikes.

Risk takers could benefit from buying Bitcoin futures contracts to leverage their positions, but they could also be liquidated if a sudden negative price move occurs ahead of the Fed’s decision on March 22. For this reason, pro traders are more likely to opt for options trading strategies such as the skewed iron condor.

A balanced risk approach to using call options

By trading multiple call (buy) options for the same expiry date, traders can achieve gains 3 times higher than the potential loss. This options strategy allows a trader to profit from the upside while limiting losses.

It is important to remember that all options have a set expiry date, so Bitcoin’s price increase must happen during the set period.

Listed below are the expected returns using Bitcoin options for the March 31 expiry, but this methodology can also be applied to different time frames. While the costs will vary, the general efficiency will not be affected.

*Profit / Loss estimate. Source: Deribit Position Builder*

The call option gives the buyer the right to acquire an asset, but the contract seller receives (potential) negative exposure. The iron condor consists of selling the call and put options at the same expiry price and date.

As shown above, the target profit area is above $23,800, and the worst scenario is a 0.217 BTC (or $5,156 at current prices) if the expiry price on March 31 happens below $23,000.

To initiate the trade, the investor must buy 6.2 contracts of the $23,000 put (sell) option. Then, the buyer must sell 2.1 contracts of the $25,000 call option and another 2.2 contracts of the $27,000 call option. Next, the investor should sell 3.5 contracts of the $25,000 put (sell) option combined with 2 contracts of the $27,000 put option.

As a final step, the trader must purchase 3.9 contracts of the $29,000 call option to limit losses above the level.

This strategy yields a gain if Bitcoin trades between $23,800 and $29,000 on March 31. Net profits peak at 0.276 BTC ($6,558 at current prices) between $25,000 and $27,000, but remain above 0.135 BTC ($3,297 at current prices) if Bitcoin trades in the $24,400 and $27,950 range.

The investment required to open this skewed iron condor strategy is the maximum loss, hence 0.217 BTC or $5,156, which will happen if Bitcoin trades below $23,000 on March 31. The benefit of this strategy is the wide profit target area, yielding a better risk-to-reward outcome than leveraged futures trading, especially considering the limited downside.

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.

Ethereum price action and derivatives data confirm bears are currently in control

Investors are unwilling to add long positions, as the Shanghai fork is expected to unlock a significant amount of ETH over a short period.

The price of Ether (ETH) declined 6% between March 2 and 3, followed by tight-range trading near $1,560. Still, analyzing a wider time frame provides no clear trend, as its chart can point to a descending channel or a slightly longer seven-week bullish pattern.

*Ether (ETH) price index in USD, 1-day. Source: TradingView*

Ether’s recent lack of volatility can be partially explained by the upcoming Shanghai hard fork, an implementation aimed at allowing ETH staking withdrawals. Those participants were each required to lock 32 ETH on the Beacon Chain to support the network consensus protocol.

After a series of delays, typical for changes in the production environment, the Shanghai Capella upgrade — also known as Shapella — is expected for early April, according to Ethereum core developer and project coordinator Tim Beiko. The Goerli testnet upgrade on March 14 will be the final rehearsal for the Shanghai hard fork before it is rolled out on the mainnet.

Recession risks increase, favoring ETH bears

On the macroeconomic front, United States Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on March 7. Powell stated that interest rates will likely rise higher than anticipated after “the latest economic data have come in stronger than expected.”

Evidence points to the Fed lagging behind the inflation curve, boosting the odds of harder-than-expected interest rate increases and asset sales by the monetary authority. For instance, an inflation “surprise” index from Citigroup rose in February for the first time in more than 12 months.

For risk assets, including cryptocurrencies, a more substantial move by the Fed typically implies a bearish scenario, as investors seek shelter in fixed income and the U.S. dollar. This shift becomes more pronounced in a recessionary environment, which many speculate is either coming or already here.

The regulatory environment is adding additional pressure for cryptocurrency firms, especially after U.S. Press Secretary Karine Jean-Pierre said the White House has noted that the crypto-friendly bank Silvergate had “experienced significant issues” in recent months.

Let’s look at Ether derivatives data to understand if the $1,560 level is likely to become a support or resistance.

ETH derivatives show reduced demand for longs

The annualized three-month futures premium should trade between 5% and 10% in healthy markets to cover costs and associated risks. However, when the contract trades at a discount (known as “backwardation”) versus traditional spot markets, it shows a lack of confidence from traders and is deemed a bearish indicator.

*Ether 3-month futures annualized premium. Source: Laevitas*

The chart above shows that derivatives traders became slightly uncomfortable as the Ether futures premium (on average) moved to 3.1% on March 7, down from 4.9% one week prior. More importantly, the indicator became more distant from the 5% neutral-to-bullish mark.

Still, the declining demand for leverage longs (bulls) does not necessarily translate to an expectation of adverse price action. Consequently, traders should analyze Ether’s options markets to understand how whales and market makers are pricing the odds of future price movements.

The 25% delta skew is a telling sign th market makers and arbitrage desks are overcharging for upside or downside protection.

In bear markets, options investors give higher odds for a price dump, causing the skew indicator to rise above 10%. On the other hand, bullish markets tend to drive the skew metric below -10%, meaning the bearish put options are in less demand.

*Ether 30-day options 25% delta skew: Source: Laevitas*

The delta skew moved above the bearish 10% threshold on March 4, signaling stress from professional traders. A brief improvement happened on March 7, although the metric continues to flirt with bearish expectations as options traders place higher costs on protective put options.

Investors basing their decisions on fundamentals will likely look to the first couple of weeks following the Shanghai upgrade to measure the potential impact of the ETH unlock. Ultimately, options and futures markets signal that pro traders are less inclined to add long positions, giving higher odds for $1,560 becoming a resistance level in the coming weeks.

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.

Bitcoin price searches for direction ahead of this week’s $710M BTC options expiry

BTC’s recent price swings are the result of regulatory pressure and the Federal Reserve’s stance on U.S. inflation.

Bitcoin (BTC) bulls laid most of their options at $24,500 and higher for the March 3 options expiry, and given the recent bullishness seen from BTC, who can blame them? On Feb. 21, Bitcoin’s price briefly traded above $25,200, reflecting an 18% gain in eight days. Unfortunately, regulatory pressure on the crypto sector increased, and despite no effective measures being announced, investors are still wary and reactive to remarks from policymakers.

For instance, on Feb. 23, U.S. Securities and Exchange Commission Chair Gary Gensler claimed that “everything other than Bitcoin” falls under the agency’s jurisdiction. Gensler noted that most crypto projects “are securities because there’s a group in the middle and the public is anticipating profits based on that group.”

March 1 comments from two U.S. Federal Reserve officials reiterated the necessity for even more aggressive interest rate increases to curb inflation. Minneapolis Fed President Neel Kashkari’s and Atlanta Fed President Raphael Bostic’s comments also decreased investors’ expectations of a monetary policy reversal happening in 2023.

The stricter stance from the macroeconomic and crypto regulatory environment caused investors to rethink their exposure to cryptocurrencies. Nevertheless, Bitcoin’s price decline practically extinguished bulls’ expectation for a $24,500 or higher options expiry on March 3, so their bets are unlikely to pay off as the deadline approaches.

Bulls were “rug pulled” by negative regulatory remarks

The open interest for the March 3 options expiry is $710 million, but the actual figure will be lower since bulls became overconfident after Bitcoin traded above $25,000 on Feb. 21.

*Bitcoin options aggregate open interest for March 3. Source: CoinGlass*

The 1.12 call-to-put ratio reflects the imbalance between the $400 million call (buy) open interest and the $310 million put (sell) options. However, the expected outcome is likely much lower regarding active open interest.

For example, if Bitcoin’s price remains near $23,600 at 8:00 am UTC on March 3, only $50 million worth of these call (buy) options will be available. This difference happens because the right to buy Bitcoin at $24,000 or $25,000 is useless if BTC trades below that level on expiry.

Bears have set their trap below $23,000

Below are the four most likely scenarios based on the current price action. The number of options contracts available on March 3 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $22,000 and $22,500: 700 calls vs. 6,200 puts. The net result favors the put (bear) instruments by $120 million.
Between $22,500 and $23,000: 1,000 calls vs. 4,800 puts. The net result favors the put (bear) instruments by $85 million.
Between $23,000 and $24,000: 2,100 calls vs. 1,800 puts. The net result is balanced between bulls and bears.
Between $24,000 and $25,000: 4,900 calls vs. 400 puts. The net result favors the call (bull) instruments by $110 million.

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.

Could weak U.S. mortgage applications could benefit BTC bulls?

Bitcoin bulls must push the price above $24,000 on March 3 to secure a potential $110 million profit. However, data from an announcement from the Mortgage Bankers Association on March 1 might turn the tide favorably for BTC. The weekly volume of mortgage applications declined by 44% versus the same period in 2022, hitting the lowest level in 28 years.

Considering the negative pressure from regulators and investors’ eying the next Fed decision on March 22, bears have good odds of pressuring BTC below $23,000 and profiting by $85 million in the March 3 weekly options expiry. Still, there’s hope for Bitcoin bulls depending on how traditional markets react to the bearish mortgage applications data.

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.

Bitcoin bulls remain in charge even in the face of increasing regulatory FUD

BTC’s correction to $22,750 followed negative remarks from financial regulators, but key Bitcoin price metrics show bulls remain optimistic.

Bitcoin (BTC) price broke above $25,000 on Feb. 21, accruing a 53% year-to-date gain. At the time, it made sense to expect the rally to continue after U.S. retail sales data from the previous week vastly surpassed the market consensus. This fuelled investors’ hope for a soft landing and a possible averted recession in the U.S. economy.

The apex of the U.S. Federal Reserve’s strategy success would be increasing interest rates and scaling back its $9 trillion balance sheet reduction without significatively damaging the economy. If that miracle happens, the outcome would benefit risk assets, including stocks, commodities and Bitcoin.

Unfortunately, the cryptocurrency markets took a hit after the $25,200 level was rejected and Bitcoin price plunged 10% between Feb. 21 and Feb. 24. Regulatory pressure, mainly from the U.S., partially explains investors’ rationale for the worsening market conditions.

In a Feb. 23 New York Magazine interview, Securities and Exchange Commission Chair Gary Gensler claimed “everything other than Bitcoin” is potentially a security instrument and falls under the agency’s jurisdiction. However, multiple lawyers and policy analysts commented that Gensler’s opinion is “not the law.” Hence, the SEC had no authority to regulate cryptocurrencies unless it proved its case in court.

Additionally, at a G20 meeting, U.S. Treasury Secretary Janet Yellen stressed the importance of implementing a strong regulatory framework for cryptocurrencies. Yellen’s remarks on Feb. 25 followed International Monetary Fund managing director Kristalina Georgieva pointing out that “if regulation fails,” then outright banning “should not be “taken off the table.”

Let’s look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand is stagnant

Traders should refer to the USD Coin (USDC) premium to measure the demand for cryptocurrency in Asia. The index measures the difference between China-based peer-to-peer stablecoin trades and the United States dollar.

Excessive cryptocurrency buying demand can pressure the indicator above fair value at 104%. On the other hand, the stablecoin’s market offer is flooded during bearish markets, causing a 4% or higher discount.

*USDC peer-to-peer vs. USD/CNY. Source: OKX*

After peaking at 4% in late January, the USDC premium indicator in Asian markets has declined to a neutral 2%. The metric has since stabilized at a modest 2.5% premium, which should be interpreted as positive considering the recent regulatory FUD.

BTC’s futures premium stuck even after price rejected at $25,000

Bitcoin’s quarterly futures are the preferred instruments of whales and arbitrage desks. Due to their settlement date and the price difference from spot markets, they might seem complicated for retail traders. However, their most notable advantage is the lack of a fluctuating funding rate.

These fixed-month contracts usually trade at a slight premium to spot markets, indicating that sellers are requesting more money to withhold settlement longer. Consequently, futures markets should trade at a 5% to 10% annualized premium on healthy markets. This situation is known as contango and is not exclusive to crypto markets.

*Bitcoin 2-month futures annualized premium. Source: Laevitas*

The chart shows traders flirting with the neutral sentiment between Feb. 19 and Feb. 24 as the Bitcoin price held above $23,750. However, the indicator failed to enter the neutral-to-bearish 0% to 5% area as additional regulatory uncertainty was added, especially after Gensler’s remarks on Feb. 23. As a result, it became clear that pro traders were not comfortable with Bitcoin price breaking above $25,000.

Weak economic data shifted control to the bulls

Since Feb. 25, Bitcoin price has gained 4.5%, indicating that the impact of the regulatory newsflow has been limited. More importantly, the global stock market reacted positively on Feb. 27 after the U.S. Commerce Department reported durable goods orders down 4.5% in January versus the previous month. This data added pressure for the Fed to reduce its interest rate hike program earlier than expected.

Since Bitcoin’s 50-day correlation with the S&P 500 futures presently stands at 83%, cryptocurrency traders are more inclined to support risk asset prices strengthening throughout the week. A correlation indicator above 70% indicates that both assets are moving in tandem, meaning the macroeconomic scenario is likely playing a pivotal role in determining the overall trend.

Unless there’s added pressure from regulators or conflicting economic data, odds favor Bitcoin bulls considering the BTC futures and Asian stablecoin metrics.

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.

Bitcoin price continues to fall, but derivatives data hints at a short-term rally to $25K

This week regulators joined hands to highlight the crypto sector’s inherent risk, but pro traders fought back by adding leverage to their long positions.

It’s possible that many people have already forgotten that Bitcoin’s (BTC) price closed 2022 at $16,529 and the recent rebound and rejection at the $25,000 level could raise concern among certain investors. Bears are pushing back at the $25,000 level and there has been multiple failed attempts at the level between Feb. 16 and Feb. 21. Currently, it looks like the $23,500 resistance is continuing to gain strength with every retest.

Pinpointing the rationale behind Bitcoin’s 45.5% year-to-date gain is not apparent, but part of it comes from the United States Federal Reserve’s inability to curb inflation while raising interest rates to its highest level in 15 years. The unintended consequence is higher government debt repayments and this adds further pressure to the budget deficit.

It’s virtually impossible to predict when the Fed will change its stance, but as the debt to gross domestic product ratio surpasses 128, it should not take longer than 18 months. At some point, the value of the U.S. dollar itself could become endangered due to extreme debt leverage.

On Feb. 23, the Fed, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint statement encouraging U.S. banks that rely on funding from the crypto sector to prevent liquidity runs by maintaining strong risk management practices. Regulators said the report was spurred by “recent events” in the industry due to increased volatility risks.

Let’s look at derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Bitcoin margined longs were used to defend the $24,000 level

Margin markets provide insight into how professional traders are positioned because it allows investors to borrow cryptocurrency to leverage their positions.

For example, one can increase exposure by borrowing stablecoins to buy (long) Bitcoin. On the other hand, Bitcoin borrowers can only bet against (short) the cryptocurrency. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

*OKX stablecoin/BTC margin lending ratio. Source: OKX*

The above chart shows that OKX traders’ margin lending ratio increased between Feb. 21 and Feb. 23, signaling that professional traders added leverage long positions as Bitcoin price broke below $24,000.

One might argue that the excessive demand for bullish margin positioning seems a desperate move after the failed attempt to break the $25,000 resistance on Feb. 21. However, the unusually high stablecoin/BTC margin lending ratio tends to normalize after traders deposit additional collateral after a few days.

Options traders are more confident with downside risks

Traders should also analyze options markets to understand whether the recent rally has caused investors to become more risk-averse. The 25% delta skew is a telling sign whenever arbitrage desks and market makers overcharge for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

In short, the skew metric will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

*Bitcoin 30-day options 25% delta skew: Source: Laevitas*

Notice that the 25% delta skew shifted slightly negative since Feb. 18 after option traders became more confident and the $23,500 support strengthened. A skew reading at -5% denotes a balanced demand between bullish and bearish option instruments.

Derivatives data paints an unusual combination of excessive margin demand for longs and a neutral risk assessment from options traders. Yet, there is nothing concerning about it as long as the stablecoin/BTC ratio returns to levels below 30 in the coming days.

Considering regulators have been applying enormous pressure on the crypto sector, Bitcoin derivatives are holding up nicely. For example, on Feb. 22, the Bank for International Settlements general manager Agustín Carstens emphasized the need for regulation and risk management in the crypto space. The limited impact of the BIS statement on the price is a bullish sign and it possibly increases the odds of Bitcoin price breaking above $25,000 in the short-term.

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.

US Federal Reserve denies Custodia Bank’s request for Fed supervision

The Federal Reserve Board has denied the request from crypto-focused Custodia Bank to reconsider its membership to the Federal Reserve System.

The United States Federal Reserve has denied a request from cryptocurrency bank Custodia Bank to reconsider its membership application to the Federal Reserve System, while a district court has allowed a lawsuit between the two parties to continue to play out.

The central bank announced its membership denial on Feb. 23, noting the Federal Reserve Board previously decided that Custodia’s application “was inconsistent with the required factors under the law.”

@federalreserve announces it has denied the request by Custodia Bank, Inc., for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve: https://t.co/ZYNUEoLeN1

— Federal Reserve (@federalreserve) February 23, 2023

The Fed rejected Custodia’s application to become a member in January, around four years after it applied for it in 2019. Board rules allow applicants to request a reconsideration of membership decisions.

At the time of the rejection, the Fed claimed Custodia had an “insufficient” management framework.

It also cited a joint declaration it made alongside the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency that claimed cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said it wishes to join the Federal Reserve System so it can be regulated under the standards that apply to traditional banks and open a path for other crypto-banks that wish to be held to those same heightened standards.

Cointelegraph contacted Custodia, which declined to comment on the matter.

Lawsuit to play out

Earlier this week, on Feb. 22, a Wyoming District Court judge denied a motion from the Fed board to dismiss a lawsuit from Custodia over a more-than-two-year delay for a Federal Reserve master account.

A master account would allow Custodia to access the Federal Reserve payment systems without using a third-party bank. The Fed denied Custodia’s master account application on Jan. 27, more than two years after it applied for the master account in October 2020.

The Fed then moved to dismiss the case due to the account denial making the lawsuit moot. However, Custodia filed a proposed amended complaint on Feb. 17, alleging the Fed unfairly singled out and rejected its application as part of a “concentrated and coordinated” effort with President Joe Biden’s administration and asked the court to overturn the decision.

In a Feb. 17 statement, Custodia spokesperson Nathan Miller said the complaint “zeroes in on the core legal issue: whether Congress even granted the Fed discretion to decide master accounts at all.” He added the Fed “forced the hand” of the crypto-bank, “which tried every avenue to find a reasonable path forward.”

The judge has ordered Custodia to file its first amended complaint to the court by March 1.

Bitcoin bears attempt to pin BTC price under $23K ahead of this month’s options expiry

$1.9 billion in BTC options are set to expire on Feb. 24, and bulls are well positioned to profit despite the Federal Reserve’s intention to cool off the U.S. economy.

Bitcoin’s (BTC) 16% price gain between Feb. 13 and Feb. 16 practically extinguished the bears’ expectation for a monthly options expiry below $21,500. As a result of the abrupt rally, these bearish bets are unlikely to pay off, especially since the expiry occurs on Feb. 24. However, bulls were not counting on the strong price rejection at $25,200 on Feb. 21, and this reduces their odds of securing a $480 million profit in this month’s BTC options expiry.

Bitcoin investors’ primary concern is a stricter monetary policy as the U.S. Federal Reserve increases interest rates and reduces its $8 trillion balance sheet. Feb. 22 minutes from the latest Federal Open Market Committee meeting showed that members were in consensus on the most recent 25 basis point rate hike and that the Fed is willing to continue raising rates as long as deemed necessary.

St. Louis Fed President James Bullard told CNBC on Feb. 22 that a more aggressive interest rate hike would give them a better chance to contain inflation. Bullard said:

“Let’s be sharp now, let’s get inflation under control in 2023.”

If confirmed, the increased interest rate pace would be negative for risk assets, including Bitcoin, as it draws more profitability for fixed-income investments.

Even if the newsflow remains negative, bulls still can profit up to $480 million in Friday’s monthly options expiry. However, bears can still significantly improve their situation by pushing the BTC price below $23,000.

Bears were not expecting Bitcoin to hold $22,000

The open interest for the Feb. 24 monthly options expiry is $1.91 billion, but the actual figure will be lower since bears expected prices below $23,000. Nevertheless, these traders were surprised as Bitcoin gained 13.5% between Feb. 15 and Feb. 16.

*Bitcoin options aggregate open interest for Feb. 24. Source: CoinGlass*

The 1.55 call-to-put ratio reflects the imbalance between the $1.16 billion call (buy) open interest and the $750 million put (sell) options. If Bitcoin’s price remains near $24,000 at 8:00 am UTC on Feb. 24, only $125 million worth of these put (sell) options will be available. This difference happens because the right to sell Bitcoin at $22,000 or $23,000 is useless if BTC trades above that level on expiry.

Bulls aim for $23,000 to secure a $155 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Feb. 17 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes these theoretical profits:

Between $22,500 and $23,000: 12,500 calls vs. 10,700 puts. The net result favors the call (bull) instruments by $40 million.
Between $23,000 and $24,000: 16,200 calls vs. 7,600 puts. The net result favors the call (bull) instruments by $200 million.
Between $24,000 and $24,500: 21,100 calls vs. 5,200 puts. Bulls increase their advantage to $385 million.
Between $24,500 and $25,000: 23,200 calls vs. 3,600 puts. Bulls dominate by profiting $480 million.

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

The Fed’s tightening policy is the bears’ best shot

Bitcoin bulls must push the price above $24,500 on Feb. 24 to secure a potential $480 million profit. On the other hand, the bears’ best-case scenario requires a 3.5% price dump below $23,000 to minimize their losses.

Considering the negative pressure from the Fed’s desire to weaken the economy and contain inflation, bears have good odds of improving their situation and settling with a $40 million loss on Feb. 24. This movement might not be successful, but it is the bears’ only way out of multi-million losses on the BTC monthly options expiry.

Looking at a broader time frame, investors still believe the Fed is destined to reverse the current monetary policy in the second half of 2023 — possibly paving the way for a sustainable rally ahead of the April 2024 Bitcoin block reward halving.

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.

Bitcoin bulls ignore recent regulatory FUD by aiming to flip $25K to support

Bitcoin’s upward momentum can continue, according to Asian stablecoin demand and the BTC futures premium.

It might seem like forever ago that Bitcoin (BTC) was trading below $18,000, but in reality, it was 40 days ago. Cryptocurrency traders tend to have a short-term memory, and more importantly, they attribute less importance to negative news during bull runs. A great example of this behavior is BTC’s 15% gain since Feb. 13 despite a steady flow of bad news in the crypto market.

For instance, on Feb. 13, the New York State Department of Financial Services ordered Paxos to “cease minting” the Paxos-issued Binance USD (BUSD) dollar-pegged stablecoin. Similarly, Reuters reported on Feb. 16 that a bank account controlled by Binance.US moved over $400 million to the trading firm Merit Peak — which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao.

The regulatory pressure wave continued on Feb. 17 as the United States Securities and Exchange Commission announced a $1.4-million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” regarding EthereumMax (EMAX) tokens on social media.

None of those adverse events were able to break investors’ optimism after weak economic data signaled that the U.S. Federal Reserve has less room to keep raising interest rates. The Philadelphia Fed’s Manufacturing Index displayed a 24% decrease on Feb. 16, and U.S. housing starts increased by 1.31 million versus the previous month, which is softer than the 1.36 million expectation.

Let’s take a look at Bitcoin derivatives metrics to better understand how professional traders are positioned in the current market conditions.

Asia-based stablecoin demand remains “modest”

Currently, the USDC premium stands at 2.7%, which is flat versus the previous week on Feb. 13 and indicates modest demand for stablecoin buying in Asia. However, the positive indicator shows that retail traders were not frightened by the recent newsflow or Bitcoin’s rejection at $25,000.

The futures premium shows bullish momentum

Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.

The two-month futures annualized premium should trade between +4% and +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.

The chart shows bullish momentum, as the Bitcoin futures premium broke above the 4% neutral threshold on Feb. 16. This movement represents a return to a neutral-to-bullish sentiment that prevailed until early February. As a result, it’s clear that pro traders are becoming more comfortable with Bitcoin trading above $24,000.

The limited impact of regulatory action is a positive sign

While Bitcoin’s 15% price gain since Feb. 13 is encouraging, the regulatory newsflow has been primarily negative. Investors are excited by the U.S. Fed‘s decreased ability to curb the economy and contain inflation. Hence, one can understand how those bearish events could not break cryptocurrency traders’ spirit.

Ultimately, the correlation with the S&P 500 50-day futures remains high at 83%. Correlation stats above 70% indicate that asset classes are moving in tandem, meaning the macroeconomic scenario is likely determining the overall trend.

At the moment, both retail and pro traders are showing signs of confidence, according to the stablecoin premium and BTC futures metrics. Consequently, the odds favor a continuation of the rally because the absence of a price correction typically marks bull markets despite the presence of bearish events, especially regulatory ones.

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.

Galaxy Digital CEO ‘wouldn’t be surprised’ if Bitcoin hit $30K this quarter

Recent positive Bitcoin price action has been linked to a slowdown in U.S. inflation, and Mike Novogratz thinks the price rally could sustain until the end of March.

Galaxy Digital Holdings CEO Mike Novogratz believes there’s a chance Bitcoin (BTC) could return to $30,000 or above before the end of March.

According to a Feb. 15 Bloomberg report, Novogratz spoke at a Bank of America conference the same day and said he would’ve been the “happiest guy” if 2022 ended with BTC at $30,000, but added:

“When I look at the price action, when I look at the excitement of the customers calling, the FOMO building up, it wouldn’t surprise me if we were at $30,000 by the end of the quarter.”

The prediction is much lower than others Novogratz has made in the past. The Galaxy CEO once believed that Bitcoin could reach $500,000 by the end of 2027 if the United States Federal Reserve kept hiking interest rates.

Announcing #48 of Cointelegraph’s Top 100 influencers in Crypto and Blockchain@novogratz

Former Goldman Sachs partner turned crypto mogul and founder of @galaxyhq, a big investor who acquired @ArgoBlockchain‘s mining facility, and recently won an auction to buy @GK8_Security. pic.twitter.com/ejpcFzOsYQ

— Cointelegraph (@Cointelegraph) February 15, 2023

During Wednesday’s conference, Novogratz again made mention of the rate hikes by Fed chair Jerome Powell, who most recently announced an interest rate hike of 25 basis points on Feb. 1. Novogratz said he didn’t expect the Fed to change its tune anytime soon:

“What makes me skeptical that we can have the explosive, back-to-the-old highs this year is Chairman Powell. He’s really doing what he says he’s going to do, and I don’t see the Fed pivoting and cutting anytime soon.”

Alongside the Fed’s February rate hike, Powell indicated inflation in the U.S. had begun to slow, which saw Bitcoin shortly spike above $24,000 before declining below $22,000.

Following the U.S. Consumer Price Index readout for January coming in roughly as expected on Feb. 14, Bitcoin gained nearly 12% in 24 hours and hit over $24,700 — its highest level since mid-August, according to Cointelegraph data.

Sentiment toward crypto also appears healthy, with the Crypto Fear and Greed index climbing nine points to 62 out of 100 and moving the scale from “neutral” into “greed” territory.

*The one-year chart of the Fear and Greed Index shows it last reached a score of 60 on March 28, 2022. Source:* *Alternative*

Bitcoin would still need to gain roughly another 22% by March 31 to reach Novogratz’s predicted price.

Bitcoin bulls stumble at $23.4K as Fed’s ‘disinflation’ sparks BTC price rally

Bitcoin price action returns to tackle familiar resistance, with bulls failing to make fresh inroads toward $25,000.

Bitcoin (BTC) rebounded to key resistance on Feb. 8 as crypto markets got a boost from a familiar source.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

Powell: “Disinflationary process” is here

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reaching the important $23,400 zone on Bitstamp overnight.

The pair reacted positively to the latest comments from the United States Federal Reserve, which also sent equities higher during the Feb. 7 Wall Street trading session.

Fed Chair Jerome Powell again mentioned “disinflation” during his appearance, reinforcing market hopes that interest rate hikes could cool more quickly in line with inflation. These stemmed from the latest meeting of the Federal Open Market Committee (FOMC) on Feb. 1, where the Fed raised rates by 0.25%.

“The message that we were sending at the FOMC meeting last Wednesday was really that the disinflationary process — the process of getting inflation down — has begun, and it’s begun in the goods sector, which is about a quarter of our economy,” he said at The Economic Club of Washington, D.C.

Powell nonetheless cautioned that there was “a long way to go” and that the U.S. was in “the very early stages of disinflation.”

Despite this, risk assets rallied into the Wall Street close, with the S&P 500 and Nasdaq Composite Index finishing up 1.3% and 1.9%, respectively.

Bitcoin also erased previous weakness, having dropped below $22,700 earlier in the week, but bulls proved unable to tackle ask liquidity at $23,400 and beyond.

That liquidity remained in place on the day, as visible in data covering the Binance order book supplied by on-chain monitoring resource Material Indicators.

*BTC/USD order book data (Binance). Source: Material Indicators/ Twitter*

“Markets rallied into the close yesterday, with Bitcoin’s last H4 candle showing weakness at resistance & printing a shooting star,” popular trader Mark Cullen summarized about the latest events.

“I personally am still waiting for the lows to get swept. BUT if the BTC can close a H$ above 23.4k I will look for a push higher.”

Crucial area held for #Bitcoin, so we should be seeking for continuation.

Gameplan is simple;
– Crack $23.3K and we’ll see new highs, correction is over.

– Lose $22.6K and I’ll be seeking $21.5-21.7K for longs on #Bitcoin. pic.twitter.com/xJp6iSbeQb

— Michaël van de Poppe (@CryptoMichNL) February 8, 2023

Michaël van de Poppe, founder and CEO of trading firm Eight, was also encouraged by Bitcoin’s reaction. A flip of $23,300 to a more solid support, he told Twitter followers on the day, would mean that the latest BTC price correction “is over.”

BTC/USD traded at around $23,200 at the time of writing, with traders still counting down to volatility returning.

Golden cross vs. death cross to resolve in a “few days”

Looking ahead, the rest of the week held little by way of important macroeconomic cues for crypto markets.

As Cointelegraph reported, eyes were already on next week’s inflation data, coming in the form of the Consumer Price Index (CPI) print for January.

At the same time, chart analysts hoped for a positive outcome from Bitcoin’s latest “golden cross” on the daily chart — its first since September 2021. At the same time, however, BTC/USD weekly timeframes continued to print a “death cross,” a phenomenon which often preceded further downside in the past.

“Many say Death Cross/Golden Cross Lagging Indicator. It is Lagging for those who only think Golden Cross means Bullish, and Death Cross means Bearish. I use this indicator to understand Momentum,” fellow trader Jibon wrote in part of a dedicated Twitter thread on the topic on Feb. 7.

Jibon compared the current setup to previous instances in 2015 and 2019 and added that it would take a “few days” for the impact of the crosses to become more obvious.

*BTC/USD comparative charts. Source: Trader_J/ Twitter*

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