Bitcoin Clears Spike Above $ 58,000 As Fed Minutes Raise Specter of Faster Unleashed Stimulus

[ad_1]

Bitcoin is showing signs of exhaustion after the minutes of the Federal Reserve’s September meeting, released Wednesday night, signaled inflation concerns and revealed growing support for a faster unwinding of stimulus measures.

The cryptocurrency is currently trading slightly lower on this day, near $ 57,300, after hitting a five-month high of $ 58,500. It is, however, up 30% this month, supported by heightened expectations that the United States Securities and Exchange Commission will soon approve a bitcoin exchange-traded fund (ETF) based on futures contracts.

The Fed minutes contained fewer references to transient inflation and showed policymakers worried that price pressures might stay high for longer than expected.

The change from the long-held rhetoric that high inflation will be short-lived suggests that the central bank may opt for faster policy tightening than is already expected. Several decision-makers have said they prefer to proceed more quickly.

A faster tightening would be negative for bitcoin and liquidity-dependent asset markets in general. Markets were anticipating a monthly decline of $ 15 billion from November or December. The central bank has been buying $ 80 billion in treasury bills and $ 40 billion in mortgage-backed securities each month since the start of the coronavirus pandemic in March 2020.

Still, sentiment among some market participants remains bullish, with analysts calling for continued crypto slang HODLing to buy and hold at least until the first ETF is approved. The SEC is expected to approve at least four ETFs this month, according to Bloomberg.

Bitcoin, however, has already rallied over 30% on ETF speculation. Additionally, an ETF based on futures contracts has a downside and may not be as bullish as expected. So, the Fed’s hawkish tilt can hurt bitcoin, especially if the stock markets fall.

The Bitcoin options market is showing demand for downside protection in the form of put options. Upstream risk assumptions [short duration] remain biased downward (i.e. put options are more expensive than calls) and put options tilt has actually increased with a rise in the spot, QCP Capital said on his Telegram channel. A reflection of the downward nervousness prevailing in the market.

The story continues

The one-week buying gap climbed to 7%, while the one-month gauge rose above zero. The positive numbers indicate that puts, or bearish bets, pull relatively higher prices than calls, which are bullish.

Long-term sentiment remains bullish, with three- and six-month bias entrenched in negative territory.

[ad_2]