Bitcoin (BTC) surged 6% after the U.S. Federal Reserve (Fed) cut interest rates by another 0.50% on September 18, pushing its price to a three-week high near $63,500. However, Derivative indicators show that Bitcoin investors are still hesitant to increase leveraged positions, putting pressure on the $62,000 support level.
The Impact of Rate Cuts and Labor Market Data on Bitcoin Price
The US jobless claims report released on September 19 lifted investor sentiment, as weekly jobless claims fell to a four-month low of 219,000, down from a peak of 250,000 in July. While still high, the decline represents a sign of improvement. Stephen Innes of SPI Asset Management told Yahoo Finance that the Fed’s focus has “shifted to the labor market,” as inflation holds steady at 2.5%.
In response to these developments, the US stock market also performed well, with the S&P 500 hitting an All-Time-High on September 19. Fed Chairman Jerome Powell reassured investors, asserting that “the US economy is in good shape” and that the rate cut was “a sign of confidence, not panic.” Powell went on to explain, “The time to support the labor market is when it is strong, not when you start seeing layoffs.”
However, some investors believe the upcoming U.S. presidential election in November could have a bigger impact on the global economy. Billionaire investor Ray Dalio told CNBC that the election “highlights the challenges in the ability of society to function smoothly.” Dalio avoided endorsing any major party candidate, instead calling for “reconcilers to come together […] to make major reforms.”
Dalio expressed concern about the prevailing “win-at-all-costs mentality,” warning that it could lead to the losing side “refusing” to accept the election results. While political debates have focused on issues like abortion, immigration, and climate change, Dalio pointed out that the high cost of living remains the top concern for voters, according to national surveys.
Given the Biden administration’s negative stance on the cryptocurrency market, Bitcoin Derivative investors are understandably hesitant to get too bullish. In a House Subcommittee hearing on September 18, Arkansas Representative French Hill accused the U.S. Securities and Exchange Commission (SEC) of injecting politics into its regulatory approach, leading to “confusion and uncertainty.”
Bitcoin Options See Declining Demand for Side Protection
To XEM whether traders are increasing their confidence in the $62,000 support level, it is important to analyze Bitcoin Futures Contract funding rates. Perpetual contracts, often referred to as inverse swaps, include an embedded funding rate that is recalculated every eight hours. A positive funding rate typically indicates higher leverage demand from buyers (long positions).
Bitcoin perpetual Futures Contract 8-hour funding rate. Source: Laevitas.ch
From September 18 to 19, Bitcoin’s 8-hour funding rate remained fairly stable at 0.005%. This equates to 0.5% monthly, which is typical of a neutral market. While a significant change from the negative rate on September 14, the current rate suggests that retail traders remain cautiously bullish on Bitcoin.
To determine whether this sentiment is limited to Bitcoin perpetual contracts, it is necessary to examine demand in the BTC options market. The put-to Call Option volume ratio measures the balance between demand for put (sell) options and Call Option . Typically, during periods of uncertainty, demand for protective options increases, pushing the ratio above 1.0.
BTC put vs Call Option volume ratio at Deribit. Source: Laevitas.ch
On September 19, the Bitcoin put to Call Option volume ratio dropped to 0.54, indicating that Call Option outnumbered puts by 86%. This is a significant change from the previous two days when the ratio reflected balanced demand between Call Option and puts. Ultimately, while Bitcoin traders may be hesitant to open leveraged long positions, the reduced demand for downside protection suggests that traders are relatively comfortable with the $62,000 support level.
This article is for general information purposes only and should not be considered legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of TinTucBitcoin.
