Reasons Why Bitcoin Price Is Dropping Despite Fed Rate Cut Odds?

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As a seasoned crypto investor with a few years under my belt, I’ve seen my fair share of market volatility and unexpected price movements. Today’s news about the expiration of $1.4 billion in Bitcoin and Ethereum options, along with the upcoming PPI inflation data, has me on edge.

The cryptocurrency market prepares for significant developments as $1.4 billion worth of Bitcoin and Ethereum options expire today, CME Bitcoin futures settle, and PPI data is released. Traders keep an eye on potential market revival signals due to the decrease in CPI inflation to a yearly minimum, which increases the likelihood of the Fed initiating rate cuts as early as September. Let’s examine the factors contributing to the falling price of Bitcoin despite the heightened prospects for September’s Fed rate cuts.

Bitcoin And Ethereum Options Worth $1.4 Billion to Expire

Approximately $1.4 billion worth of Bitcoin and Ethereum options are set to expire on July 12, based on data from the leading crypto derivatives exchange, Deribit. The price of Bitcoin has dipped to a daily low of $56,561, with insufficient trading volumes underpinning any potential recovery for the cryptocurrency.

Approximately 23,722 Bitcoin options with a total value of around $1.36 billion are set to expire today on Deribit. The put-call ratio stands at an unusually high level of 1.08 due to open interests of 12,328.50 in puts versus 11,393.50 in calls. This disparity fuels doubt regarding Bitcoin’s potential recovery in the near future.

Additionally, the maximum perceived loss for option holders occurs at a Bitcoin price of $58,500. More put options than call options are held at this strike price, signifying greater demand for protection against potential losses. At present, the max pain point surpasses the current Bitcoin price, suggesting that bearish sentiment among traders prevails and downward pressure on Bitcoin continues.

Reasons Why Bitcoin Price Is Dropping Despite Fed Rate Cut Odds?

The historical volatility of the market has persistently increased, while the Bitcoins Derivatives Volatility Index (DVOL) indicates a potential decrease. Caution prevails among options traders due to the ongoing German government Bitcoin sell-off.

At present, options with a notional value of approximately $0.48 billion for Ethereum (ETH) are due to expire. The put-call ratio stands at 0.37, and the max pain price is set at $3,100. Currently, ETH’s market price is under the max pain price, suggesting that traders may still have the opportunity to recoup losses amid the ongoing sentiment surrounding the Ethereum Exchange Traded Fund (ETF).

Reasons Why Bitcoin Price Is Dropping Despite Fed Rate Cut Odds?

PPI Inflation Data Looms

The anticipated yearly increase in producer price index (PPI) in the United States is projected to be 2.3%, superior to the 2.2% recorded in May. Monthly, a rise of 0.1% is predicted compared to the previous -0.2% decrease.

Economists anticipate a year-over-year increase of 2.5% for the Core Producer Price Index (PPI) in June, up slightly from the 2.3% rise seen in May. Additionally, they predict the Core PPI to register a month-over-month gain of 0.2%, surpassing the previous month’s figure.

As a crypto investor, I’ve noticed that the US Consumer Price Index (CPI) came in at 3% recently, which has boosted the likelihood of Federal Reserve interest rate cuts to surpass 90%. Consequently, Bitcoin bounced back above $58,000 due to market optimism. Nevertheless, the price has taken a hit as pessimistic sentiments have emerged.

Bitcoin Price Falls As CME Futures Closes

Last week, as CME closed its Bitcoin futures market for the weekend, traders offloaded their contracts. This mass selling caused the Bitcoin price to dip below the $57,000 mark. However, investors can look forward to resuming their trades when CME reopens its BTC futures trading on Sunday.

This week, the crypto market experienced a modest recovery, accompanied by a significant decrease in market volatility – reaching its lowest point since March. The combination of quarterly deliveries and price swings presented an optimal moment for sellers to enter the market. Concurrently, option sellers aggressively initiated numerous positions, acting as a contributing factor in lowering the implied volatility (IV) for major expirations.

Based on data from Coinglass, the open interest for Bitcoin futures contracts traded on the CME exchange decreased by approximately 1% within the past 24 hours. Currently, the total open interest stands at around $8.26 billion.

Reasons Why Bitcoin Price Is Dropping Despite Fed Rate Cut Odds?

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2024-07-12 14:37