Hawkish Fed Has Bitcoin Market Showing Strongest Bias for Downside Protection in 3 Months

Crypto traders initial worries astir a hawkish Fed materialized Wednesday arsenic Chairman Jerome Powell chopped involvement rates but expressed uncertainty astir the velocity and grade of aboriginal easing. And present the sentiment has deteriorated.

Bitcoin's seven-day call-put skew shows that Deribit-listed enactment options offering downside extortion and expiring successful 1 week are trading astatine the highest implied volatility premium to telephone options since September, according to information root Amberdata. In different words, enactment options are the astir costly comparative to calls successful 3 months.

Its a motion of traders scrambling to hedge their bullish bets against a imaginable continuation of Wednesday's terms slide, triggered by a hawkish Fed.

The dour sentiment is besides evident from the antagonistic one-month skew, reflecting a bias for puts and a importantly weaker telephone bias successful options ranging from 2 to six months. These calls traded astatine a 3 vol premium to puts astatine property time, down from the 4-5 vol premium observed aboriginal this month.

On Wednesday, the Fed chopped the benchmark involvement complaint by 25 ground points to the 4.25% to 4.5% range. That's 100 ground points little than the September levels erstwhile it began the easing cycle.

Bitcoin declined pursuing the complaint cut, arsenic Fed Chairman Jerome Powell described it arsenic a adjacent telephone and emphasized caution regarding aboriginal moves arsenic rates approach the neutral level.

Powell besides said that the Fed has nary volition of participating successful immoderate authorities program to make a strategical bitcoin reserve, adding that committee members bash not mean to propulsion for changes to the Fed law. This comes aft President-elect Trump's caller notation that his medication would see establishing a BTC reserve akin to the country’s lipid stockpile.

Meanwhile, the dot plot, an anonymous graphical practice of wherever the 19 committee members task the fed funds rates volition beryllium successful the future, signaled lone 2 complaint cuts successful 2025 alternatively of 3 expected and down from 4 successful September.

The dot crippled fundamentally out-hawked the markets, sending hazard assets lower. While Dow Jones ended bled 2.5% oregon implicit 1,000 points, BTC slipped from astir $105,000 to nether $99,000, according to information root TradingView and CoinDesk.

As of this writing, BTC is trading astatine astir $101,200, aiming to retrieve from overnight losses.

Meanwhile, the dollar index, which gauges the greenback's worth against large currencies, continues to clasp connected to its overnight gains, holding dependable adjacent 108, the highest level since October 2022. A persistent strength successful the USD could adhd to hazard assets' woes.