Bitcoin (BTC) and Broader Crypto Market Tank 7%, Expect Volatility Before FOMC

Following the release of the United States Producer Price Index (PPI) inflation data for February on Thursday, March 14, Bitcoin and the wider cryptocurrency market experienced selling pressure. At the time of reporting, Bitcoin has declined by 6.95%, trading at $68,195, with a market capitalization of $1.342 trillion.

Bitcoin (BTC) Investors Preparing for Volatility Before FOMC

As the market anticipates the upcoming Federal Open Market Committee (FOMC) meeting scheduled for March 20, traders are bracing for a potentially volatile weekend. QCP Capital, a prominent trading firm, reported an increase in perpetual swap open interest over the last 24 hours, signaling heightened activity in the market.

Risk reversals for both Bitcoin (BTC) and Ethereum (ETH) are currently skewed towards put options in the near term, indicating a cautious sentiment among investors. Despite this, QCP Capital noted strong demand for year-end BTC call options with strike prices ranging from 100k to 150k, suggesting bullish expectations for the cryptocurrency’s performance by the end of the year.

Questions arise about the possibility of a short-term market dip before a potential rally towards BTC reaching 150k by year-end. Perpetual funding rates and the forward curve remain elevated, prompting QCP Capital to view spot-forward spreads as an attractive opportunity for a 20-30% risk-free trade.

Despite the potential for short-term sell-offs, analysts believe that these fluctuations are unlikely to have a lasting impact on the overall uptrend, especially with the sustained demand for daily spot BTC ETFs. Investors are closely monitoring market developments ahead of the FOMC meeting, which could further influence trading activity in the coming days.

The Shifting Market Sentiment

Data from Greeks.Live suggests that the prevailing narrative surrounding ETF inflows appears to be undergoing a shift, as indicated by significant declines in implied volatility (IV) across all major terms in recent days. Additionally, a lack of clear direction in block options orders suggests a weakening market sentiment.

Market analysts have noted that the current sentiment resembles a cooling phase, which historically precedes the start of a bull market, reported Greeks.Live.

Furthermore, the Bitcoin ETF daily inflows were the lowest in March on Thursday. As per data from SoSoValue, March 14 witnessed significant movements in Bitcoin spot ETFs, with notable inflows and outflows. Grayscale’s ETF GBTC experienced a substantial net outflow of $257 million within a single day. Conversely, BlackRock’s IBIT ETF emerged as the frontrunner, recording a remarkable net inflow of $345 million, contributing to its historical net inflow reaching $12.37 billion.