Bitcoin Retreats as Federal Reserve Decision Takes Center Stage

The crypto market fell Tuesday, losing early week momentum and eroding gains. Bitcoin BTC$90,595.76 currently trades at $90,150, down from Monday’s high of $92,350. The CoinDesk 20 Index (CD20) has lost 2.1% in 24 hours with all members declining.

The price action mirrors last week’s performance when bitcoin rallied from $86,300 to $93,200 between Sunday and Tuesday before dropping back to $88,000 in the latter half of the week.

This week, the difference is Wednesday’s Federal Reserve interest-rate decision, with the market overwhelmingly predicting a 25 basis-point cut. Reductions are generally perceived as bullish for risk assets like cryptocurrencies because the dollar becomes less valuable to hold.

But the probability of a rate cut has been high for weeks, meaning that eventuality is likely to be priced in already. If that’s the case, risk assets could sell-off on the news because it would mean there are no more bullish catalysts for the rest of the year.

Derivatives positioning

The market shows no signs of pre-Fed jitters with BTC and ETH 30-day implied volatility indexes, BVIV and EVIV, holding steady.
On Deribit, activity is seen in the June expiry puts at strikes as low as $20,000 and calls above $200,000. These are mostly likely bullish volatility plays and not price directional trades.
Overall, BTC and ETH puts remain pricier than calls, with block flows featuring risk reversals and put diagonal spreads in bitcoin.
In ETH’s case, flows included call spreads and risk reversals.
As for futures, most major tokens, including BTC and ETH, have seen a decline in open interest (OI). In BCH’s case the drop was 8%.
ZEC’s OI has risen by 16% to 2.30 million ZEC, coming close to the record 2.32 million ZEC on Dec. 4.

Token talk

The altcoin market continues to recess, with several tokens underperforming bitcoin as investor appetite for speculative assets plunges to cycle lows.
HYPE lost 8.6% in 24 hours while STRK, QNT and KAS are down 5.7%-6.3%.
CoinMarketCap’s “altcoin season” indicator is also resting at cycle lows of 18/100, a far cry from Sept. 20, when it topped 78/100.
Over the past 90 days bitcoin has dropped by around 20%. Still, that’s dwarfed by the altcoin sector, with more than half of the top-100 tokens by market cap sliding in excess of 40%.
The worst-performing tokens include AI-focused FET, which is still reeling from a public spat with Ocean Protocol and accusations of token sales, and TIA$0.5906, which has tumbled 67% in 90 days following a round of layoffs and a lack of any onchain activity.
A handful of tokens have bucked the bearish trend, notably privacy coins zcash ZEC$427.97 and dash DASH$48.88, and a deserved mention goes to BNB and BCH$575.92, which have stayed relatively flat despite the broader market weakness.