As analysts prepare for a possible 'hawkish stance with interest rate cuts,' Bitcoin [BTC] is leading the cryptocurrency market with a significant risk-averse posture on the eve of the Federal Reserve's interest rate decision announcement.
Hours before the Federal Open Market Committee (FOMC) meeting, Bitcoin slid from its historical peak of $108,000 to $103,000. The market has widely anticipated that the Federal Reserve will again cut rates by 25 basis points and has fully digested this expectation.
However, given the persistently high inflation in the U.S., analysts predict that the Federal Reserve will exhibit a 'hawkish stance,' which may have significant implications for its interest rate path in 2025.
So, what will be the subsequent trend of BTC?
Some bearish signals have emerged on BTC's technical charts, including a evening star pattern, which is often seen as a potential trend reversal sign.
For those unfamiliar, an evening star is a bearish reversal candlestick pattern that involves three candlesticks; a large bullish candlestick, followed by a smaller candlestick, and finally a large bearish candlestick.
This indicates that BTC may crash in the short term.
Interestingly, option traders have remained cautious since last week. They are more inclined to hedge potential price declines with put options rather than chasing price increases as they did in previous weeks.
In fact, BTC recently reached new highs of $107,000 and $108,000, facing short-term bearish sentiment from option traders.
Deribit's 25 delta risk reversal (25RR) for options expiring on Friday, December 20, is negative, highlighting the bearish sentiment and abundance of put options.
Put options expiring on January 3, 2025, are slightly higher than call options (bullish bets). The trading prices of the remaining options expiring in the first quarter of 2025 (by March) are between 1-3 volatility points.
This is in stark contrast to a few weeks ago when volatility points could soar to 4-5 due to option traders chasing the market. It remains to be seen whether the trend will change after the FOMC meeting.
Nevertheless, despite the recent cautious trend in the options market, QCP Capital still maintains a long-term bullish outlook for 2025.