Fed May Delay Rate Cut, Bitcoin Drops with Stocks, Futures Premium Falls Below 5%, but Options Data Provides Glimmers of HopeFollowing the release of US September inflation data, Bitcoin prices fell in tandem with US equities, as market concerns heightened about the Federal Reserve potentially delaying further rate cuts. The consumer price index (CPI) rose 2
Fed May Delay Rate Cut, Bitcoin Drops with Stocks, Futures Premium Falls Below 5%, but Options Data Provides Glimmers of Hope
Following the release of US September inflation data, Bitcoin prices fell in tandem with US equities, as market concerns heightened about the Federal Reserve potentially delaying further rate cuts. The consumer price index (CPI) rose 2.4% year-on-year in September, slightly lower than August's 2.5%, but exceeding expectations of 2.3%, sparking worries about persistent inflation and impacting the performance of risk assets like stocks and Bitcoin.
After the CPI data release, Bitcoin briefly dipped below $59,000 before recovering to trade at $60,888. Beyond the inflation figures, changes in the labor market also drew investor attention. Initial jobless claims unexpectedly jumped to 258,000 last week, hitting a 14-month high. While this surge could partly be attributed to Boeing's strike, it fueled anxieties about the health of the US economy.
Bitcoin Futures Premium Drops Below 5%, Amplifying Market Concerns
A critical indicator in the Bitcoin futures market witnessed a worrisome shift. Under normal market conditions, the Bitcoin futures premium (the difference between monthly contracts and spot exchange prices) should fall within an annualized premium (basis) of 5%-10%, compensating for the longer settlement period. However, on October 10th, the Bitcoin futures premium fell below the 5% neutral benchmark, a first in two months.
Importantly, the last time this indicator turned bearish was on August 5th, leading to a 24.6% Bitcoin crash over the following three days, pushing prices down to $49,268. The change in the Bitcoin futures indicator reflects a reduction in buy orders (longs) and could signal increased selling pressure in the short term. As of early this morning, the Crypto Fear & Greed Index stood at 32, indicating fear, typically representing lower trading activity and poor market liquidity.
Bitcoin Options Delta Changes Offer a Ray of Hope
While the futures market displayed some negative signals, Bitcoin options data provided a balanced perspective. The 25% delta of Bitcoin options remains near zero. This indicates that major traders and market makers haven't altered their views on short-term risk-reward, suggesting that the sharp decline in the Bitcoin futures premium might be temporary, possibly driven by a few large institutions unexpectedly closing out leveraged long positions.
"Derivatives traders haven't yet bet on a significant decline in Bitcoin prices." This opinion offers a glimmer of hope, suggesting the current dip might not morph into a sustained bearish trend, but rather a temporary emotional downturn.
Although it appears dangerous, take a closer look: the bears haven't been as strong as the previous three times, while the bulls have thrice broken through previous highs. This demonstrates that since the major drop on August 5th, the bulls have begun to gradually recover. Currently, Bitcoin is undoubtedly consolidating here. While the price hasn't surpassed previous high points, it experienced a dip below $50,000, but quickly recovered.
Overall, while Bitcoin's trajectory might seem perilous, considering the larger trend, BTC remains in a bull market.
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