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Bitcoin

Hawkish Fed comments and Bitcoin derivatives data point to more downside for BTC

A pump of $750 on August 26 took Bitcoin (BTC) from $21,120 to $21,870 in less than two hours. However, the move was completely wiped out after US Federal Reserve Chairman Jerome Powell reiterated the bank’s commitment to contain inflation by tightening the economy. After Powell’s speech, the BTC price dropped to $ 20,700.

Bitcoin
Source : Tradingview

At Jackson Hole, Powell said, “the historical record strongly warns against premature easing of policy.” US stock indexes reacted negatively and the S&P 500 fell 2.2% in an hour. The friendly “Bart candle” appeared on the Bitcoin chart, a reference to the shape of Bart Simpson’s head and a descriptor of BTC’s up and down price action.

Regulators increase speed in crypto legislation

On August 24, the US Federal Deposit Insurance Corporation (FDIC) issued cease and desist letters to five companies, including FTX US, for allegedly making false statements about deposit insurance related to cryptocurrencies On August 25, India-based crypto exchange CoinSwitch searched its premises by Anti-Money Laundering agents for alleged violations of Forex laws.

Launched in India in 2020, CoinSwitch has successfully raised capital from Coinbase Ventures, Andreessen Horowitz, Sequoia and Tiger Global. Finally, on August 26, the US Securities and Exchange Commission delayed its decision on global investment firm VanEck’s Bitcoin spot exchange-traded fund (ETF).

Pro traders were neutral-to-bearish ahead of the dump

Retail traders often avoid quarterly futures because of the price differential from the spot markets. Still, they are the preferred tool for professional traders as they prevent the constant fluctuation of funding rates that usually occurs in the contract. In healthy markets, the indicator should trade at a premium of 4% to 8% per year to cover costs and associated risks. This was not the case, however, as the Bitcoin futures premium remained below 1.8% the entire time. For example, a 25% delta skew is an important sign when market makers and arbitrage tables overcharge to hedge up or down.

bitcoin
Source: Laevitas
btc
Source: Laevitas
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In bear markets, options traders give higher odds for a price drop, causing the skewness indicator to rise above 12%. These two derivative metrics suggest that the August 26 Bitcoin price drop may have followed traditional stock market performance.  Derivatives data do not leave room for bullish comments, as the weather deteriorated after Powell’s comments and market conditions showed further weakening.

About Hama Amefiz

Amefiz is a professional blockchain, cryptocurrency and tech journalist, regular contributor to newsbsc.com who is writing analysis about the latest developments in the cryptocurrency and blockchain space.

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