Bitcoin (BTC) is clinging to a foothold above $40,000 as traders navigate a confluence of crucial events this week, including the U.S. Gross Domestic Product (GDP) data and a massive $5.8 billion crypto options expiry on Friday.
Fed Jitters Fade, Bitcoin Finds Footing:
Traders scaled back bets on rapid Fed rate cuts, with the probability of a March reduction dropping from 80% to 50% within a month. This shift, spurred by concerns about persistent inflation, calmed markets and provided some respite for Bitcoin. The leading cryptocurrency, after dipping towards $38,500 earlier in the week, settled comfortably above $40,100.
Dollar Dips, Bitcoin Cheers:
The U.S. dollar index, a measure of the greenback’s strength against major currencies, edged lower from recent highs. This weakening benefited Bitcoin, as a strong dollar typically weighs on riskier assets like cryptocurrencies.
U.S. GDP: Growth Slowdown in Focus:
Later today, the highly anticipated U.S. fourth-quarter GDP data will drop. Analysts expect economic growth to have slowed to 2% annualized, down significantly from 4.9% in Q3 and marking the weakest pace since 2022’s second quarter. This slowdown could weigh on risk sentiment and impact Bitcoin’s trajectory.
Options Expiry: A $5.8 Billion Showdown:
Adding to the day’s drama, a whopping $5.8 billion in crypto options, primarily Bitcoin and Ethereum, are set to expire tomorrow.
This massive expiry event could trigger volatility, with the “max pain” points identified around $41,000 for Bitcoin and $2,300 for Ethereum. Whether options sellers manipulate the market towards these points to maximize losses for buyers remains to be seen.
Market Sentiment Shifts, But Caution Reigns:
Deribit, the world’s largest crypto options exchange, reports “call-put skew” rising, indicating a gradual shift in investor sentiment towards bullishness. However, with key catalysts approaching and the lingering inflation threat, cautious optimism is the prevailing mood.
In conclusion, Bitcoin’s price found temporary refuge above $40,000, fueled by a softer dollar and a cooling-off in Fed rate hike expectations. However, the upcoming U.S. GDP data and the massive options expiry create a volatile cocktail that could send the market in either direction. Investors will keep a close eye on these developments, adjusting their positions cautiously as the story unfolds.
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