The Fed has little ammo left as $30K Bitcoin price becomes key battle line

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Bitcoin price successfully defended the $28,000 support on May 2nd, but has yet to prove the strength needed to regain the $29,200 level from April 30th.

$30,000 Becomes Important for Bitcoin Bulls

Some analysts have applied the recent downtrend to expectations of a rate hike by the U.S. Federal Reserve on May 3, but in reality, the market is on the verge of a modest 25 basis point rate hike to 92%. We factor in the odds of , to the highest level after 25 basis points. September 2007.

$DXY Up/#bitcoin Down on yesterday’s release of PMI data.

The market is now pricing in a very likely 25bps price hike tomorrow #FOMC.

This is probably priced to BTC, but subsequent comments (more rates/pauses) could introduce volatility. https://t.co/H5qtGpd8gA pic.twitter.com/BmdsNRtb1f

— Decentrader (@decentrader) May 2, 2023

As noted by market intelligence platform Decentrader, Fed Chairman Jerome Powell’s comments point to further measures to slow the economy or suggest that the final interest rate is likely to approach 5%. and likely to bring the element of surprise. Chairman Powell is scheduled to hold a press conference at 2:30 pm ET.

From an employment perspective, central banks have reason to believe that markets continue to overheat. The US government reported his 1.6 vacancies for every unemployed person in March. Furthermore, according to the ADP National Employment Report, released May 3, private sector employment increased by 296,000 in April, well above the market consensus of 148,000.

However, higher interest rates will have a negative impact, especially on families and small businesses. Financing and mortgages will become more costly, and investments in bonds will become more attractive. Such undesired effects of restraining inflation could further shake the core of the financial system. This is illustrated by the recent bank failure of First Republic Bank.

Therefore, the eventual Bitcoin (BTC) price break above $30,000 is an indication that investor perceptions of Bitcoin as a risky asset will continue to grow as a scarce digital asset that directly benefits from a fragile traditional banking system. could be a definitive sign of a shift to

However, to determine if Bitcoin’s resilience above $28,000 is sustainable, investors should consider whether buyers are using too much leverage, and whether professional traders are using BTC derivatives to push the market down. It is necessary to analyze whether the possibility of

Bitcoin futures show low demand from leveraged buyers

Bitcoin quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a small premium to the spot market, indicating that sellers are demanding more money to delay settlement.

As a result, futures contracts in a healthy market should trade at a premium of 5-10% per annum. This situation is known as contango and is not unique to the cryptocurrency market.

The data suggests that Bitcoin traders have been very cautious over the past few weeks. Even when BTC price climbed to $30,000 on April 26th, there was no sign of demand for leveraged longs.

Related: Balaji Pays Crazy $1 Million Bitcoin Bet, Falling 97% Below Price Target

Moreover, Bitcoin futures premiums have stagnated by nearly 2% since April 23, suggesting buyers are reluctant to use leverage, which is healthy for the market. By avoiding futures contract exposure, it significantly reduces the risk of large-scale forced liquidations during negative Bitcoin price movements.

Bitcoin Options Traders Remain Neutral

The Bitcoin options market can also help traders understand whether the recent correction has made investors more optimistic. A delta skew of 25% is a sign when arbitrage desks and market makers are overcharging for upside or downside protection.

In short, if a trader expects Bitcoin price to drop, the skew indicator will be over 7%, and the excitement phase tends to a skew of -7%.

A skew of 25% in options delta indicates that demand for call and put options has been balanced over the past four weeks. This is surprising given that the Bitcoin price rose 10% between April 25th and April 30th, when it last tested the $30,000 resistance.

As a result, the Bitcoin options and futures market suggests that professional traders do not put a tip on Bitcoin’s price breaking above $30,000 any time soon. are priced at similar odds for positive and negative moves of

Ultimately, Bitcoin’s price should be positively impacted regardless of May 3’s decision, given that there is clearly a limit to how far the Fed can raise interest rates without triggering a recession.

Fed Chairman Powell will eventually force the US Treasury to inject more money into the economy to contain the banking crisis. This is beneficial for scarce assets like Bitcoin.

This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.