Crypto derivatives market turns cautious ahead of FOMC minutes and PCE data, analysts say
2024-11-26

Crypto market sentiment is turning cautious, with Ethereum and Bitcoin showing signs of reduced optimism as traders prepare for the release of key U.S. economic data. Both assets are experiencing shifts in options implied volatility, signaling uncertainty ahead of the Federal Open Market Committee minutes and Wednesday's U.S. inflation report.
"Ethereum implied volatility has shifted sharply toward puts over calls, reflecting a similar sentiment in Bitcoin as the market takes a breather,” analysts from QCP Capital noted in a recent report. This indicates growing concerns about downside risks as traders await clarity from the Federal Reserve's minutes and October’s Core Personal Consumption Expenditures data, both expected to influence near-term market direction.
Wider markets are showing signs of caution, with Dow futures down 0.02% and S&P 500 futures also down 0.02%. Bitcoin has dipped below the $93,000 mark as traders consolidate positions, stalling the anticipated march toward the symbolic $100,000 level. "Despite this, fundamentals remain strong, and we expect accumulation around the $95,000 level before the next rally begins," BRN analyst Valentin Fournier told The Block.
Ethereum, meanwhile, has posted a price correction of over 5% in the past day, now changing hands for around $3,300, according to The Block's Price Page. Deribit data shows that the put-call ratio for Ethereum options has risen to 0.74 for the end-of-November expiry, signaling increased caution among traders. QCP Capital analysts suggest this reflects broader market sentiment as the end of the year approaches with no immediate catalysts to drive prices higher. "There are growing concerns about downside risks may intensify, particularly with tonight’s FOMC minutes and Wednesday's PCE data on the horizon," QCP Capital analysts added.
Key US economic data that could impact digital assets
Key events this week include the release of the FOMC meeting minutes later today, which will offer insights into the Federal Reserve's policy discussions and potential reactions to the recent presidential election results. Since the U.S. Federal Reserve's November rate decision, which lowered rates by 25 basis points, Fed officials have raised some concerns about a potential slowdown in inflation reduction progress.
According to the CME's FedWatch tool, interest rate traders are setting the likelihood of a 25 basis-point cut at the upcoming December 18 FOMC meeting at 59.4%, so there is still a significant 40.6% likelihood that rates remain steady.
On Wednesday, the Core PCE inflation report for October will be published, providing a crucial indicator of inflationary trends and their implications for monetary policy. The upcoming PCE report is expected to show a 0.3% monthly increase. However, Fournier said that a lower-than-expected inflation reading could bolster the case for another rate cut this year. "This would strengthen Bitcoin’s momentum and improving its chances of breaking through $100,000," he added.
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