In brief
- Bitcoin traders may need up to a week to fully process the Federal Reserve’s first rate cut in nine months, with $120K now “within sight” according to Bitbank’s analysis.
- 92% of CME FedWatch traders anticipate another 25-basis point Fed cut in October, while 72% of Myriad prediction market users expect the same outcome.
- Despite bullish technical sentiment, Bitcoin options flows show traders are selling premium and capping upside between $125K-$150K rather than making aggressive directional bets.
It could take a week for Bitcoin traders to fully digest the impact of the Federal Reserve’s first interest rate cut in 9 months, according to Bitbank analyst Yuya Hasegawa.
“With risk-on sentiment persisting after the FOMC, this improvement in technical sentiment is seen as an additional tailwind [for Bitcoin], putting a test of $120,000 within sight,” wrote the Tokyo-based analyst in a note shared with Decrypt. “Should BTC successfully break above $120,000, a full retracement may finally come into focus. The market will digest the result for probably a week or so and go back to normal, focussing back on inflation and rate cuts.”
Next week includes planned remarks from Federal Reserve Chair Jerome Powell and Vice Chair for Supervision Michelle W. Bowman on Tuesday. Although the revised dot plot released by the Federal Open Markets Committee this week showed the possibility of two more rate cuts in 2025, Powell didn’t make any promises.
Traders will be reading for nuances each time Powell or another member of the FOMC gives a speech. Looking ahead to the October meeting, 72% of users on Myriad, a prediction market owned by Decrypt parent company Dastan, anticipate another 25-basis point cut and nearly 11% think the Fed will leave rates unchanged in its penultimate meeting for the year.
Rate cut bulls have shown even more strongly on the CME FedWatch Tool, which estimates 92% of traders are expecting the Fed to approve another 25-basis point cut. The tool shows 8% of traders think the Fed will skip a cut next month.
“At present, the stronger dollar and weaker bonds (higher yields) remain concerns,” Hasegawa added in his note. “However, this can be seen as a short-term reaction, given that the bond market had overly priced in cuts for next year.”
Deutsche Bank research analysts said they’d be watching for hints of what’s to come when Powell speaks on Tuesday. They added that traders should also scrutinize new consumer spending data due to be released by the Bureau of Labor Statistics Friday, Sept. 26.
“Our U.S. economists see month-over-month growth in core PCE coming in at 0.22%, down from 0.3% in July,” the analysts wrote in a note shared with Decrypt. Their forecasts for personal income and consumption will slow to 0.3%, compared to 0.4% in July; and that spending will rise 0.5%, staying level with July.
For now, Bitcoin options activity shows that traders are cashing in on premiums rather than holding their breath for a breakout, according to Jake Ostrovskis, head of OTC trading at digital assets market maker Wintermute.
“Flows are dominated by premium selling and upside caps,” he wrote in a note shared with Decrypt. He added that traders are selling call spreads between $125,000 to $150,000, meaning that they don’t expect Bitcoin to trade much higher than that range.
He added that “the overall stance is range-bound positioning and carry harvesting rather than aggressive directional bets.”
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