The Federal Reserve has implemented a reduction of interest rates by 25 basis points, aligning with market predictions as announced on Wednesday.
In the wake of this announcement, both Bitcoin (BTC) and various altcoins have experienced an upward trend. However, one analyst cautioned that the Bitcoin options market is bracing for a downturn despite the Fed’s rate cut.
In an interview with Coindesk, Luuk Strijers, CEO of Deribit, expressed that traders in Bitcoin options are gearing up for potential declines even amidst favorable news regarding the Fed’s decision to lower interest rates.
Strijers pointed out that all delta curves for Bitcoin across Deribit’s 7-day, 30-day, 60-day, and 90-day metrics are currently negative. This trend suggests a stronger inclination towards put options or bearish positions among traders.
Additionally, he highlighted that Deribit’s Bitcoin Volatility Index (DVOL) has dropped to its lowest point in two years at just 24%. In a scenario where there is significant demand for put options combined with low volatility levels like this one can be interpreted as indicative of bearish sentiment.
Strijers also cautioned investors might have already factored in the effects of the Fed’s rate cut into current prices. He emphasized that deteriorating economic conditions could lead to diminished interest in high-risk assets such as Bitcoin. Investors seem to be on standby for triggers beyond just actions from the Federal Reserve.
“After the Fed’s announcement was made public, some initial enthusiasm seems to have waned. The market now appears poised for further developments—be they macroeconomic or specific to cryptocurrency—that could shift existing cautious optimism within option positions.”
*This content does not constitute investment advice.