[ad_1]
Bitcoin remains in a narrow range as attention turns to the Federal Reserve’s monetary policy statement on Wednesday, which could offer clues to the central bank’s course of action and inject volatility into financial markets .
The cryptocurrency trades in a narrow range of $ 39,400 to $ 41,300 since European trading hours on Monday, according to data from CoinDesk 20.
“The market is completely neutral to the Fed with only a small spot buy,” said Brian Tehako, CIO at Warwick Capital Management. “Traders are waiting for the Fed’s announcement.”
The event is likely to have a binary reaction from the market, according to Singapore-based QCP Capital. Binary events are dramatic developments that trigger large movements in both directions.
“If the Fed remains accommodating [retains pro-stimulus bias], cryptocurrencies would have the greatest upside potential until at least September, given the oversold we have seen against other macro markets since the May CPI was printed, ”noted QCP Capital in its Telegram channel.
Bitcoin went from $ 58,000 to almost $ 30,000 in the eight days leading up to May 19. The sale began after official data released on May 12 showed the U.S. consumer price index hit its highest level in nearly three years. This renewed fears of an anticipated Fed cut by the gradual unwinding of the liquidity stimulus plan.
However, as bitcoin fell on Fed tightening fears, traditional markets remained resilient, with gold ending May with a gain of 7.8%. The shares also remained long.
This leaves bitcoin and cryptocurrencies in general relatively cheap upon entry to the Fed, and could benefit them the most with a conciliatory result.
On the other hand, a hawkish surprise could weigh on asset prices. “If they are hawkish on Wednesday, then all bets are off, and we would expect the [crypto] market to review recent lows, ”said QCP Capital.
According to Patrick Heusser, chief trading officer at Zurich-based Crypto Broker AG, painful trading could be a risky reaction, causing safe-haven currencies like the franc, yen and US dollar to rise, and a sell-off on them. commodities and stocks. “The risk could also lead to losses for bitcoin,” Heusser said.
The crypto market appears to have positioned itself for increased volatility after the Fed. “The crypto market appears to be a long gamma before the event,” Denis Vinokourov, head of research at Synergia Capital, told CoinDesk.
Gammar refers to the speed of variation of the option delta, the sensitivity of the option price to variations in the price of the underlying asset. In other words, gamma measures the rate of change in the price of options relative to changes in spot market prices.
Being long gamma means holding an options position with a net gamma greater than zero. Clearly, the position will benefit from a recovery in the price volatility of the underlying asset.
[ad_2]
picture credit