by As anticipation builds around the Federal Reserve’s upcoming rate cut decision, the sentiment surrounding Bitcoin (BTC) and Ether (ETH) has shifted dramatically. Recent data from the options market indicates a significant easing of downside fears, paving the way for potential price increases in these leading cryptocurrencies. This article delves into what traders can expect from BTC and ETH as the market reacts to the Fed’s actions slated for September 17.
Market Sentiment Shifts: Understanding the Options Data
According to data from Amberdata, Bitcoin’s seven-day call/put skew—a metric that illustrates how implied volatility is distributed between calls and puts—has rebounded to nearly zero. Just a week ago, this figure was sitting at a bearish 4%. This uptick in sentiment suggests that traders are increasingly optimistic about BTC’s potential upside.
While the 30- and 60-day option skews remain slightly negative, their recovery from last week’s lows is a promising sign of reduced downside apprehensions. A similar trend can be observed with Ether, which shows an improving options skew as well. These skews reflect the market’s directional bias, indicating whether traders are more concerned about prices rising or falling. A positive skew leans towards bullish sentiment, whereas a negative reading indicates a preference for protective puts.
The Effect of Fed Rate Cut on Bitcoin and Ether Prices
The easing fears come as Bitcoin and Ether experience a renewed upswing, with BTC gaining over 4% to surpass $116,000 and Ether rising nearly 8% to $4,650 in the past week, according to CoinDesk. The crucial factor influencing the next price movement will be the magnitude of the anticipated Fed rate cut.
Current data from CME’s Fed funds futures indicates that traders have priced in a greater than 90% probability that the central bank will implement a 25 basis point (bps) cut, bringing the target interest rate down to between 4% and 4.25%. However, there remains a slim chance of an unexpected 50 bps cut, which could send BTC soaring.
Potential Outcomes Based on Rate Cut Decisions
Experts are weighing the implications of the Fed’s choices. Greg Magadini, director of derivatives at Amberdata, noted that “a surprise 50 bps rate cut would be a massive +gamma BUY signal for ETH, SOL, and BTC.” This sentiment reflects the broader market’s anticipation that such a move would invigorate both traditional and cryptocurrency markets alike.
Notably, the Deribit-listed Solana (SOL) options are already showcasing strong bullish sentiment, with calls trading at a considerable premium over puts. This indicates that traders are expecting upward movement in SOL as well.
If the Fed’s decision aligns with expectations for a 25 bps cut, BTC is likely to continue a calm “grind higher.” Magadini suggests that Ether may require some additional time—approximately a week—to retest its all-time highs and consistently trade above the $5,000 mark.
Conclusion: What Lies Ahead for Bitcoin and Ether
The upcoming Fed rate decision is set to be a pivotal moment for Bitcoin and Ether. With current market conditions indicating a potential for upward momentum, traders and investors should remain vigilant and prepared for various outcomes. As we approach the date, the landscape may shift rapidly, making it essential to stay informed about the latest developments in the cryptocurrency space.
For those interested in diving deeper into the world of cryptocurrency, it’s crucial to understand how to buy Bitcoin, Ethereum, and other digital assets. You can explore our guides on How to Buy Bitcoin, How to Buy Ethereum, and How to Buy Solana to get started. Also, make sure to check out our reviews on various exchanges like Kraken and Binance for safer trading experiences.
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