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The American economist and member of the Federal Reserve Board of Governors, Christopher Waller, believes blockchain technology is “totally overrated,” even though the U.S. central bank “put a lot of resources into understanding digital currencies and the blockchain.” On Friday, Waller spoke during a panel that discussed central bank digital currencies (CBDCs) and said that […]
The CEO of Almonty Industries has warned that it could take the Federal Reserve 10 years to get inflation under control if they do not act now and stop spending money. “And they need to raise rates. That’s the only tool that works,” he said. Federal Reserve Could Take a Decade to Get Inflation Under […]
Holding $42,000 will help determine whether BTC bulls bag a $175 million profit in March 25’s $3.34 billion options expiry.
Over the past two months, Bitcoin (BTC) has respected an ascending triangle formation, bouncing multiple times from its support and resistance lines. While this might sound like a positive, the price is still down 11% year-to-date. As a comparison, the Bloomberg Commodity Index (BCOM) gained 29% in the same period.
The broader commodity index benefited from price increases in crude oil, natural gas, corn, wheat and lean hogs. Meanwhile, the total cryptocurrency market capitalization was unable to break the $2 trillion resistance level and currently stands at $1.98 trillion.
In addition to 40-year record high inflation in the United States, a $1.5 trillion spending bill was approved on March 15, enough to fund the government through September. Worsening macroeconomic conditions pressured the supply curve, which, in turn, pushed commodities prices even higher.
For these reasons, cryptocurrency traders are increasingly concerned about the U.S. Federal Reserve rate hikes expected throughout 2022 to contain inflationary pressure.
If the global economies enter a recession, investors will seek protection in U.S. Treasuries and the U.S. dollar, itself, moving away from risk-on asset classes like cryptocurrencies.
The open interest for the March 25 options expiry in Bitcoin is $3.34 billion, but the actual figure will be much lower since bulls were overly-optimistic.
These traders might have been fooled by the short-lived pop to $45,000 on March 2, as their bets for March 25’s options expiry extend beyond $100,000.
Even Bitcoin’s recent rally above $42,000 took bears by surprise because only 16% of the bearish option bets for March 25 have been placed above this price level.
The 1.75 call-to-put ratio shows more sizable bets because the call (buy) open interest stands at $2.13 billion against the $1.21 billion put (sell) options. Nevertheless, as Bitcoin stands near $42,000, most bearish bets will likely become worthless.
For instance, if Bitcoin’s price remains above $42,000 at 8:00 am UTC on March 25, only $192 million worth of these put (sell) options will be available. This difference happens because there is no use in a right to sell Bitcoin at $40,000 if it trades above that level on expiry.
Below are the three most likely scenarios based on the current price action. The number of options contracts available on March 25 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:
This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.
Related: Terra may be about to repeat $125M BTC buy that sparked Bitcoin’s run to $43.3K
Bitcoin bears need to pressure the price below $42,000 on March 25 to avoid a $175 million loss. On the other hand, the bulls’ best case scenario requires a push above $44,000 to increase their gains to $280 million.
Bitcoin bears had $150 million leverage short positions liquidated on March 22, so they should have less margin required to drive Bitcoin price lower. With this said, bulls will undoubtedly try to defend $42,000 until the March 25 options expiry.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
The 16th chair of the Federal Reserve, Jerome Powell said that America’s “inflation is much too high” on Monday, and he further explained that the U.S. central bank is willing to raise rates more aggressively. Off the heels of the first benchmark interest rate increase since 2018, Powell stressed that the Fed will “take the […]
Crypto comes to the Persian Gulf, U.S. Congress moves sideways, Australia is looking at regulating DAOs.
Last week got off to an antsy start as the clause that many interpreted as a direct route to ban proof-of-work-(PoW)-based cryptocurrencies made a sudden comeback to the draft of the European Union’s key directive on digital assets. Many in the crypto policy space got immediate flashbacks to other instances of harmful last-minute additions to must-pass legislation days and hours before the vote. It all ended well, though, as the Committee on Economic and Monetary Affairs voted against the draft that contained the hostile language. Over in the United States, monetary policy kept growing more political, as evidenced by Sarah Bloom Raskin, President Joe Biden’s pick for the Federal Reserve’s vice chair for supervision, being forced to withdraw her nomination due to a Senate gridlock. Ukrainian President Volodymyr Zelenskyy took time off urgent matters of national defense to sign a bill granting digital assets legal status into law. Other big narratives of the week included crypto platforms’ expansion into the Gulf region, a slew of crypto-related statements and actions by members of the U.S. Congress and some favorable policy developments in Australia.
Several Middle Eastern jurisdictions have welcomed major players of the global crypto industry on their soil last week. The streak kicked off with Binance, the world’s largest crypto exchange by volume, securing authorization from the Central Bank of Bahrain on March 14. The license covers services such as trading, custody and portfolio management. Less than one day later in a historic first, crypto exchange FTX landed a license from the newly established Dubai Virtual Asset Regulatory Authority. Binance, however, was hot on FTX’s heels, announcing that it had obtained a Dubai virtual asset exchange license on March 16. With crypto powerhouses lining up to set shop in Dubai, the emirate looks poised to become the region’s cryptocurrency hub thanks to its leadership’s far-sighted policy initiatives.
Digital assets remain high on many U.S. federal legislators’ agendas with yet another Congressional hearing, this time with national security and illicit finance angle, taking place at the Senate Committee on Banking, Housing, and Urban Affairs. Hot-button issues like sanctions, compliance and ransomware facilitation inevitably received much spotlight. Yet, industry representatives were also able to carve out some time to call for Congress to ramp up its work on providing regulatory clarity to U.S.-based crypto businesses. Meanwhile, crypto allies and adversaries in Washington, D.C., kept doing their respective business. A bipartisan group of congresspeople, led by Minnesota Representative Tom Emmer, have called out the Securities Exchange Commission boss Gary Gensler for subjecting cryptocurrency companies to unnecessary scrutiny. Crypto’s eternal critics: Representative Brad Sherman and Senator Elizabeth Warren, in turn, announced bills that would authorize the U.S. government to limit digital asset service providers’ ability to deal with Russia-based persons and entities.
Australian Senator Andrew Bragg, the crypto industry’s longtime champion, has announced a wide-ranging legislative package called the Digital Services Act. In addition to familiar themes such as laying down rules for service provider licensing, custody, and taxation, the initiative emphasizes the need to regulate decentralized autonomous organizations, or DAOs. Bragg argues that such entities represent a “threat to the tax base” and thus must be recognized and regulated urgently. The New South Wales Senator unveiled the proposed framework at a blockchain conference. The document is yet to be formally introduced to the Australian legislature.
The president of the Federal Reserve Bank of St. Louis, James Bullard, has called for more aggressive measures to combat inflation and reduce the size of the Fed’s balance sheet. “The burden of excessive inflation is particularly heavy for people with modest incomes and wealth and for those with limited ability to adjust to a […]
Ethereum climbed to a two-week high on Thursday, as markets continued to react to yesterday’s Fed decision. As expected, the Federal Reserve increased interest rates by 0.25%, whilst providing forward guidance for future hikes. BTC was once again trading above $40,000. Bitcoin BTC was trading above $40,000 for a second consecutive session, as bullish pressure […]
But a near-perfect correlation between Avalanche and Bitcoin so far this year could spoil the bullish outlook.
A sharp upside retracement in the Avalanche (AVAX) market this week has raised its possibilities to rise by another 100% in Q2.
The bullish outlook primarily appears in the wake of AVAX’s multi-month bull flag setup, which formed after a strong price move higher to over $150, an all-time high in the Avalanche market. In detail, the setup is a downward sloping channel, denoted by two parallel trendlines against the previous trend, with volumes declining to underscore a weakening downtrend.
In a perfect scenario, bull flags resolve with a breakout move above their upper trendlines, followed by an extended uptrend, with the profit target at length equal to the size of the underlying asset’s previous uptrend (also called flagpole).
That could have AVAX’s price to undergo a similar upside move in the coming weeks, beginning with a close above its interim resistance of 20-week exponential moving average (20-week EMA; the green wave in the chart above) and later with a breakout above the flag’s upper trendline.
As a result, AVAX may eye a run-up towards $157, up more than 100% from its current prices near $77.
The latest bout of buying in the Avalanche market has appeared largely due to its strong positive correlation with Bitcoin (BTC).
Notably, AVAX and BTC were moving almost perfectly in tandem at the beginning of 2022, with their correlation coefficient coming out to be between 0.90 and 0.99. However, as of March 17, the reading had corrected to around 0.79, still underscoring Avalanche’s continued preference of mirroring the benchmark cryptocurrency’s moves.
Nonetheless, the correlation exposed AVAX to the same downside risks that Bitcoin has been facing since November 2021, including Federal Reserve’s quantitative tightening and the ongoing Ukraine-Russia conflict.
On March 16, Fed’s chairman Jerome Powell said that the U.S. economy is strong enough to bear higher interest rates as he announced the central bank’s first rate hike since 2018.
Meanwhile, Joel Kruger, a strategist at crypto exchange LMAX Digital, noted that the central banker’s hawkish tone could pressure Bitcoin into falling further away from its all-time high of $69,000.
“Rates going higher will strangle equity markets. So if we see a mass exodus out of risk assets, it’ll weigh on everything,” he told Bloomberg, stressing that Bitcoin could fall to $20,000, thus contributing “to a decline in crypto assets.”
Related: Avalanche aims to accelerate subnet adoption with multiverse incentive program
As a result, AVAX’s bullish outlook risks invalidation as long as it tails Bitcoin’s price accurately. That could mean a potential price pullback from its interim resistance level of around $80, coinciding with the 0.618 Fib line of the Fibonacci retracement graph drawn from $9-swing low to $152-swing high.
If the correction occurs, AVAX’s next support line appears at the 0.786 Fib line around $64.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
On Wednesday, the Federal Open Market Committee (FOMC) and Fed chair Jerome Powell held a press conference concerning the American economy, the central bank’s plans to address inflation, and the ongoing Russia-Ukraine war. Powell announced that the FOMC decided to increase the benchmark bank rate by a quarter percentage and further noted the Fed anticipates […]