Bitcoin’s Rally Stalls Amid Fed’s Hawkish Tone and Market Signals Suggesting Pullback
Bitcoin’s (BTC) recent rally has hit a roadblock as the cryptocurrency struggles to maintain its footing above $90,000. Meanwhile, trends in the Deribit options market for BTC are mirroring patterns that previously signaled a downturn in Trump Media shares.
These patterns, known as implied probability distributions, reflect market expectations for an asset’s future price, derived from options pricing across various strike prices and expiration dates. A noticeable “left shift” in this distribution for BTC indicates traders are increasingly anticipating lower price levels ahead, according to data from crypto financial platform BloFin.
“Whether it’s MSTR, COIN, or Deribit BTC options, the implied probability distribution has shifted left significantly,” said Griffin Ardern, BloFin’s head of options trading and research, in a chat with CoinDesk. “This suggests a consensus among traders that current BTC and altcoin prices may still be overvalued, with further corrections likely on the horizon.”
Ardern noted a similar shift in the probability distribution for DJT options, which foreshadowed the sharp decline in Trump Media’s share price. After hitting a high of $54 in late October, DJT shares have since dropped by 50%, trading at $27 as of now, per TradingView. The initial surge was driven by market optimism around Republican candidate Donald Trump’s victory in the November 5 U.S. election.
Despite Trump’s pro-crypto stance and anticipated policies fueling BTC’s rise by over $20,000 to a peak of $93,000, the cryptocurrency has since retreated, trading at $88,100 at press time, according to CoinDesk data.
Hawkish remarks from Federal Reserve officials have further weighed on market sentiment. On Thursday, Fed Chair Jerome Powell tempered expectations of rapid rate cuts, stating, “The economy is not sending any signals that we need to be in a hurry to lower rates.” Since September, the Fed has reduced rates by 75 basis points, providing a boost to risk assets, but Powell’s comments suggest a more cautious path forward.
Still, optimism in the market persists. Many traders are maintaining bullish positions, banking on bitcoin breaking the $100,000 milestone despite the current headwinds.
