The cryptocurrency market has slumped on Tuesday US stock prices As growth in the wake of US yields and the US dollar US Federal Reserve Chairman Jerome Powell’s aggressive remarks Tuesday, the first day of his semi-annual testimony before the US Congress.
Powell warned that the Fed could raise interest rates higher and faster than before. Analysts interpreted Powell’s comments as opening the door for a possible 50 bps rate hike at this month’s policy meeting.
Bitcoin It was last trading above $22,000 after its first decline below that level since mid-February earlier in the session and was down about 1.5% on the day. Technicians pointed out that Tuesday’s decline means Bitcoin It has now broken below an uptrend that has been in play since mid-January, opening the door for a possible retest of February lows at $23,000 and perhaps the 18.th January low in the $20,300s.
Certainly, the 14-day Relative Strength Index (RSI) suggests that there is plenty of room for further downside before then. Bitcoin reaches a point of being oversold. Bitcoin’s RSI was around 40, with a score below 30 indicating that the market has turned extremely bearish.
some bears believe a reexamination of of bitcoin A move to the 200-day moving average and realized price (the average price at which each bitcoin last moved on the blockchain) in the $19,700-800 area is a possibility. Crypto futures traders have certainly turned more bearish, with futures margin funding rates turning negative in recent days to a level not seen since early January.
As Powell warned, moving US interest rates higher and at a faster pace than previously thought was a possibility, depending on how hot the upcoming US economic data is. Crypto traders will now be nervously monitoring this week’s US jobs data in hopes that the data reveals a not too strong labor market. The current stronger-than-expected US labor market is seen as a challenge to the Fed, which is trying to get inflation under control.
If the jobs data turns out to be on the stronger side, it could lead to further downside in crypto as traders bet on a 50 bps rate hike from the Fed later this month. This may spoil the sentiment in the crypto market.
Options markets still bullish on volatility risks
Bitcoin options markets continue to signal that price risks remain limited, despite concerns that another flamboyant reappraisal of Fed tightening expectations could spark volatility in the nascent cryptocurrency market. For example, according to data presented by The Block, Deribit’s Bitcoin Volatility Index (DVOL) remained unchanged at 51 on Tuesday, still not much higher than January’s record low of 42. Deribit is the leading exchange for cryptocurrency derivatives.
Meanwhile, the delta skew of 25% of bitcoin options expiring in 7, 30, 60, 90 and 180 days also continues largely sideways, within recent ranges and, for the most part, still pretty close to zero. indicating a fairly neutral market. Positioning bias. In fairness, the 25% delta skew for shorter term expirations like 7 and 30-day is slightly negative at around -1.5, while the 180-day is at around 2.4, meaning the market is moderately to slightly more optimistic. Long term bitcoin price outlook compared to short term.
The 25% delta option skew is a popular monitored proxy of the extent to which trading desks are charging investors more or less for the upside or downside protection through put and call options being sold. A put option gives an investor the right but not the obligation to sell an asset at a predetermined price, while a call option gives an investor the right but not the obligation to buy an asset at a predetermined price.
A 25% delta option skew above 0 suggests that desks are charging more for equivalent call options versus puts. This implies that there is strong demand for calls versus puts, which can be interpreted as a bullish sign as investors are more eager to hedge (or bet) a security against a rise in prices.
The options markets are sending a message that a major near-term decline in prices is unlikely. This could suggest that bitcoin will receive strong dip-buying interest if/when it retests key support areas around $21,400, $20,300 or the $19,700-800 area.