Surge in Fed Rate-Cut Bets: Will Bitcoin Break Through $91K?

Surge in Fed Rate-Cut Bets: Will Bitcoin Break Through $91K?

Despite the positive trends in the U.S. stock market and rising gold prices, Bitcoin has struggled to surpass the $93,000 mark. With the S&P 500 near its all-time high, traders are contemplating what might ignite a sustained bullish trend for Bitcoin.

Key Takeaways:

The demand for BTC put (sell) options and lack of movement in ETF inflows have been limiting momentum, even with improving macroeconomic conditions.
Technological advancements driven by AI have alleviated market pressure, but Bitcoin's strength hinges on maintaining the $90,000 level, as investors hope for liquidity support following weaker job data.

The demand for BTC put options and minimal ETF inflows have restricted Bitcoin's momentum despite easing economic conditions. While the relief from AI-driven technology has somewhat eased market worries, Bitcoin's stability is crucial around the $90,000 threshold as investors anticipate liquidity support in light of softer employment statistics.

Fed target rate expectations for Dec. 10. Source: CME Group FedWatch Tool

According to bond market futures data from the CME Group, traders are now assigning an 87% probability to an interest rate cut on December 10, a notable increase from 71% the previous week. Weakness in the U.S. job market has led investors to foresee a more accommodative monetary policy. For instance, the U.S. Labor Department reported that continuing claims rose to 1.96 million in the week ending on November 15.

Meanwhile, sentiment within the BTC derivatives market hasn’t changed significantly despite recent price declines; however, there remains a cautious demand for bullish options.

Bitcoin futures annualized basis rate. Source: Laevitas.ch

On Saturday, Bitcoin’s monthly futures displayed a 4% premium over spot markets, which has remained steady compared to the previous week. Typically, under neutral conditions, this basis range would be between 5% to 10% to reflect carrying costs. The tepid interest in leveraged long positions may signify continued apprehension following Bitcoin's 18% decline over the past month.

BTC options markets serve as a gauge to assess whether whales and market makers anticipate further downturns. A bearish phase is often characterized by an uptick in put option demand.

Bitcoin options put-to-call premium volumes at Deribit, USD. Source: Laevitas.ch

In recent trading on Thursday and Friday, the volume of put options significantly overtook call options, indicating heightened uncertainty in the market. A more balanced market would require the put-to-call premium volume to drop to 1.3x or lower. Currently, sentiment in Bitcoin derivatives remains cautious, although it is still far from the peak level of 5x that favored downside protection observed on November 21.

This current hesitation can also be attributed to stagnant inflows into Bitcoin exchange-traded funds (ETFs), which saw only a modest increase of $70 million in net assets for the week ending November 28. Furthermore, CoinGlass data indicates that no companies using Bitcoin as a primary reserve asset have increased their holdings in the last two weeks.

Top companies holding BTC reserves. Source: CoinGlass

The last notable addition was made by strategic investors to Bitcoin positions on November 17. Of particular concern is SpaceX, which transferred 1,163 BTC to new addresses on Thursday, sparking speculation about a possible sale.

🚨 NEW: SpaceX moves 1,163 $BTC worth about $102M to two new addresses, per Nansen data. — Cointelegraph (@Cointelegraph)

It remains uncertain whether Elon Musk’s company has changed custodians, as they have not provided any official comment on the matter.

Tax-Cutting Measures Boost Interest in Scarce Assets

During the U.S. holiday season, President Donald Trump reiterated his intentions to implement significant income tax cuts, which he claims will be funded by revenue from import tariffs. This prompted investors to be more risk-tolerant, believing that government debt pressures would persist, a backdrop typically favorable for scarce assets such as Bitcoin. Over the week, gold prices increased by 3.8%, while silver reached a record high.

Related: Robert Kiyosaki warns cash shortages could trigger a crash but remains optimistic about Bitcoin and gold.

Worries surrounding the artificial intelligence sector declined after Google’s custom TPU chip allowed its Gemini platform to excel in benchmarks related to coding, math, science, and multimodal reasoning. This technological progress has boosted investor confidence due to its significantly lower energy consumption compared to GPU-based systems. As a result, Alphabet (GOOG US) shares jumped by 6.8% over the week, alleviating fears surrounding Nvidia’s (NVDA US) growth forecasts.

S&P 500 Index (left) vs. Bitcoin/USD (right). Source: TradingView / Cointelegraph

Bitcoin's journey to reaching $100,000 seems increasingly disconnected from overarching macroeconomic trends, as its correlation with tech stocks continues to wane. The longer Bitcoin maintains a position above $90,000, the more confidence bulls will have, especially if ETF inflows resume, coupled with a lower risk appetite in BTC derivatives and possible liquidity injections from the central bank.