Crypto Market Cautious Ahead of Fed Rate Decision

Despite short-term caution, analysts remained bullish in the mid-term.led the crypto market with notable de-risking ahead of the Fed rate decision as analysts prepared for a possible ‘hawkish cut.’ The cryptocurrency declined from an all-time high of $108K to $103K just hours before the FOMC meeting. Markets had priced in another 25bps interest rate cut. But analysts expected a ‘hawkish tone’ due to the sticky U.S. inflation, which could affect the Fed rate path into 2025.

“The tone may be slightly hawkish, with inflation stabilizing above 2% and a strong labor market keeping the Fed cautious.”The firm added that the BTC chart flashed bearish signs, including an evening star, a signal of potential trend reversal. “The technical outlook for BTC also appears cautious, with BTC printing an evening star on the daily timeframe and exhibiting bearish divergences.”For the unfamiliar, the evening star is a bearish reversal candlestick pattern involving three candlesticks; a large bullish one, followed by a smaller and finally a large bearish candle.Interestingly, options traders have been cautious since last week. They preferred for potential price declines through put options than chasing price rallies as they did in prior weeks. In fact, the recent BTC new highs of $107K and $108K were met by short-term bearish sentiment from options traders.25-delta risk reversal (25RR) was negative for options expiring on Friday, 20th December, underscoring bearish sentiment and the richness of put options.Put options expiring on the 3rd of January 2025 were also trading at a slight premium to calls (bullish bets). The rest of Q1 2025 (up to March) expiries were trading between 1-3 volatility points. This was completely different from a few weeks ago, when the volatility points could surge to 4-5 as options traders chased the rallies. Whether the trend will change after the FOMC meeting remains to be see

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