QCP Capital analysts have flagged rising implied volatility in the options market as the end-of-week expiration looms. With bitcoin’s spot price remaining relatively flat over the past 24 hours, the current put-call ratio has tilted in favor of put options — signaling a more cautious stance among traders.

"As we approach the first Federal Reserve rate cut of this cycle, market tensions are rising, amplifying the impact of any unexpected macro data, and the probability of a 50 basis points cut has jumped. This is mirrored in increasing volatility, with Friday implied volatility up 8 points for bitcoin and 20 points for ether," the analysts said.

This week's Bitfinex Alpha report also forecast an increase in cryptocurrency market volatility this week driven by investor expectations surrounding an anticipated Fed rate cut. "We see the potential for market volatility this week as quite high, driven by investor anticipation of the Fed rate cut decision. Currently, the market dynamics are poised for potential volatility, influenced significantly by investor expectations surrounding imminent rate cuts," Bitfinex analysts said.

The report added that market reaction could vary significantly depending on the magnitude of the rate cut. A 25 basis-point cut may sustain a moderate risk-on environment, while a larger 50 basis-point cut could trigger stronger buying or, conversely, profit-taking among cautious investors. "This volatility is likely to be reflected across spot bitcoin exchange-traded funds and perpetual markets, with increased fluctuations as traders adjust their positions," Bitfinex analysts noted.

Recent market data indicates a growing expectation of a 50 basis-point rate cut at the upcoming Federal Open Market Committee meeting.  According to the CME FedWatch tool, the likelihood of a 50 basis-point cut has climbed to 65%, eclipsing the 35% probability for a 25 basis-point cut.

BRN analyst Valentin Fournier said that concerns about persistent inflation and the risk of a recession could lead to a negative market reaction, even if the Federal Reserve delivers an expected 50 basis point rate cut. "Bitcoin BTC +0.91% 's price has been volatile in recent weeks, and the upcoming Fed pivot is expected to amplify this volatility. Technical indicators suggest that the momentum behind bitcoin's recent rebound since the $52,500 dip on 6 Sep is weakening, raising the possibility of a trend reversal," Fournier told The Block.

Bitcoin posted a muted 1% increase in the past 24 hours and was trading at $59,181 at 6:41 a.m. ET, according to The Block’s Price Page. The price of ether has traded flat over the same period, now changing hands for around $2,300.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

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