Bitcoin, the leading digital currency, experienced significant de-risking ahead of the Federal Reserve’s interest rate decision, with many analysts anticipating a potentially ‘hawkish cut.’
Prior to the FOMC meeting, Bitcoin dropped from its record high of $108,000 to $103,000. Market participants had already factored in a 25 basis points interest rate reduction.
However, analysts foresaw a ‘hawkish stance’ due to the persistent U.S. inflation levels, which might influence the future path of Fed interest rates up to 2025.
QCP Capital, a crypto trading firm, shared a similar viewpoint.
“The sentiment is expected to lean towards a more hawkish tone, considering the inflation remaining above 2% and a robust job market urging caution from the Fed.”
What Lies Ahead for Bitcoin (BTC)?
QCP Capital highlighted bearish indications on the BTC chart, such as the appearance of an evening star pattern, suggesting a potential shift in trend direction.
“The technical analysis of BTC looks conservative as an evening star pattern is revealed on the daily chart, alongside bearish divergences.”
For those unfamiliar with the term, an evening star indicates a bearish reversal pattern consisting of three candles – a large bullish one followed by a smaller one, and finally a large bearish candle.
This observation hinted at a possible short-term BTC downturn.
Interestingly, options traders have been prudent since the previous week, opting to hedge against potential price drops using put options rather than chasing price hikes like they did in recent weeks.
Notably, the recent BTC highs of $107,000 and $108,000 faced bearish sentiment from short-term options traders.
At the current moment, the 25-delta risk reversal (25RR) on options expiring on the 20th of December was negative on Deribit’s platform, emphasizing the prevalence of bearish sentiment and the attractiveness of put options.
Similarly, put options expiring on the 3rd of January 2025 were slightly more expensive than call options (bullish positions). The options expiring in Q1 2025 (up to March) were trading with a volatility range of 1-3 points.
This scenario was in sharp contrast to a few weeks ago when volatility points could escalate to 4-5 as options traders chased price rallies. The potential shift in trend post the FOMC meeting remains uncertain.
Nonetheless, QCP Capital maintained an optimistic long-term outlook up to 2025 despite the short-term cautious sentiment in the options market.
Another analyst, Stockmoney Lizards, also echoed a positive long-term perspective, suggesting further growth potential for BTC based on the monthly reading of the Relative Strength Index (RSI).