To the dismay of the bulls, the crypto markets continued their whipsawing action again on Thursday, with large early gains more than reversed in a very short time frame.
Occurring over a period of a few hours as opposed to yesterday’s few minutes, the size of today’s reversal was almost as large with leading crypto bitcoin falling from a session high of $89,300 to as low as $85,500. At press time, BTC changed hands at $86,000, down 0.8% over the past 24 hours.
The early increases came alongside a much cooler-than-expected November report in the US consumer price index, with headline inflation falling as low as 2.7% from 3% previously. That data quickly set the stage for another interest rate cut by the Federal Reserve in January and also helped spur traditional markets, with the Nasdaq up about 2% at its session high.
However, skeptics quickly delved into the extreme inflation figures. “The big issue was resetting the rent/owner equivalent rent (OER) in October,” wrote well-followed economist Omair Sharif. Unless the BLS adjusts, he continued, it will artificially lower year-over-year CPI prints until April
“This is completely inexcusable,” wrote WSJ’s Nick Timiraos. “BLS just assumed rent/OER was zero for October … There’s just no world where this was a good idea.”
At the moment, the markets seem to agree with the skeptics, with odds of a rate cut in January having not budged from their previous slim chance of 24%.
BTC rangebound, ETH hedging
Traders in the crypto options market seem to be adjusting their expectations with bitcoin and ether shows divergent sentiment according to data from Wintermute. Bitcoin options activity points to a range-bound outlook as traders continue to sell downside protection below $85,000 and limit upside exposure above $100,000.
This “points to confidence in support stock and limited expectations for a sustained breakout in the near term,” the market maker’s OTC trading desk wrote in a note.
Ether options, on the other hand, show less conviction and more hedging behavior. Support appears to be forming around $2,700 to $2,800, but upside calls above $3,100 are being sold aggressively, suggesting traders are seeking protection above the upside.
