Cryptonews News Bitcoin to Sub-$20,000 Next?

Bitcoin to Sub-$20,000 Next? Here’s What Options Markets Say About the BTC Price Outlook

Bitcoin logo in a storm. Source: Abode
Cryptocurrency markets have slipped on Tuesday in tandem with US stock prices as US yields and the US dollar rise in wake of hawkish commentary from US Federal Reserve Chairman Jerome Powell at the first day of his semi-annual testimony before the US Congress on Tuesday.

Powell warned that the Fed could lift interest rates higher and at a faster pace than previously signalled. Analysts interpreted Powell’s remarks as an opening of the door to a possible 50 bps rate hike at this month’s policy meeting.

Bitcoin was last trading just above $22,000 following its first dip beneath that level since mid-February earlier in the session and was last down about 1.5% on the day. Technicians pointed out that Tuesday’s drop means Bitcoin has now broken below an uptrend that had been in play since mid-January, opening the door to a potential retest of February’s lows in the $23,000s and perhaps even the 18th January low in the $20,300s.

Certainly, the 14-Day Relative Strength Index (RSI) suggests that there is plenty of room further downside before Bitcoin reaches a point of being oversold. Bitcoin’s RSI was last around 40, with a score below 30 seen as signifying that market conditions have become overly bearish.

Some bears think that a retest of Bitcoin’s 200-Day Moving Average and Realized Price (the average price at which each Bitcoin last moved on the blockchain) in the $19,700-800 region is a possibility. Crypto futures traders certainly seem to have turned more bearish, with the futures margin funding rates having turned negative in recent days to a degree not seen since early January.

US interest rates rising higher and at a faster pace than previously signaled, as Powell warned was a possibility, depends upon how hot upcoming US economic data is. Crypto traders will now be nervously monitoring this week’s US jobs data, hoping the data doesn't reveal too strong a labor market. The current stronger-than-expected US labor market is viewed as a challenge for the Fed, who are trying to get inflation under control.

If the jobs data does come out on the stronger side, this could trigger further downside in crypto as traders increase bets on a 50 bps rate hike from the Fed later this month. That would likely worsen sentiment in the crypto market.

Options Markets Still Sanguine on Volatility Risks
Despite concerns that a further hawkish repricing of Fed tightening expectations could provoke fresh cryptocurrency market volatility, Bitcoin options markets continue to signal that price risks remains limited. For example, Deribit’s Bitcoin Volatility Index (DVOL) remained unchanged at 51 on Tuesday, still not too far above January’s record lows of 42, according to data presented by The Block. Deribit is the dominant exchange for cryptocurrency derivatives.