(Bloomberg) — The speculative frenzy surrounding Bitcoin since Donald Trump’s U.S. election victory is moderating in both the spot and derivatives markets.
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The largest digital asset fell below $87,000 on Friday after Fed Chairman Jerome Powell said there was no need to rush rate cuts. That left the token about $6,500 below the all-time high reached on Wednesday.
In the derivatives sector, K33 Research said the premium paid for CME-listed Bitcoin futures above the spot market price has fallen. US-based institutional investors use the contracts to take positions on the native cryptocurrency. Figures from Amberdata indicate a 24-hour rise in open interest – or outstanding contracts – for bearish options with a strike price of $80,000.
“The markets appear to be cooling down,” said Vetle Lunde, head of research at K33, adding that the narrowing of the futures premium “could have been a subtle hint of a moderating risk profile.”
Trump’s promises
Bitcoin has risen about 30% since the US elections on November 5 in response to newly-elected President Trump’s pro-crypto stance. The digital asset is now seen as part of a series of so-called Trump trades, and speculators are wondering how much momentum the rally has left.
Trump has promised to create a friendly regulatory framework for crypto, establish a strategic Bitcoin stockpile and make the US the global hub for the industry. Once a crypto skeptic, Trump changed course after digital asset companies spent heavily to further their interests during their election campaigns. Questions remain about the feasibility and implementation timeline of its promises.
Investors poured a net $4.7 billion into U.S. spot Bitcoin exchange-traded funds after Election Day. The twelve funds, from issuers such as BlackRock Inc. and Fidelity Investments, now have total assets of about $94 billion, based on Bloomberg figures.
Volatility expected
“It’s all pure speculative trading right now,” said James Davies, CEO of on-chain futures and options trading platform Crypto Valley Exchange. “Expect a lot of volatility and a lack of clear signals for a while as we await policy announcements in the US.”
Davies highlighted $90,000 as an important marker to keep an eye on to see if this is a ‘resistance level’, or if we are already well past it. One of the highest concentrations of bullish bets on Bitcoin options is the $100,000 strike, data from the Deribit exchange shows.
Outside of Bitcoin, smaller tokens like second-place Ether and meme crowd favorite Dogecoin were mixed Friday, in line with declining risk appetite as traders trimmed their bets on Fed rate cuts after Powell’s comments.
–With help from Dave Liedtka.
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