Key Takeaways
How are investors positioning themselves in the run-up to the Fed’s interest rate decision?
Market consensus suggests a further 0.25% rate cut is likely, but investors have been cautious.
What key targets do options traders pay attention to?
They expect BTC to secure $100,000 as support, with $120,000 as an upside target.
After staying below $110,000 this weekend, Bitcoin [BTC] rose to $111,000 on October 20. The recovery followed reports that the US and China were ready to commit to resolving tariff frictions related to rare earth minerals.
The update strengthened risky assets, including BTC. S&P Futures soared as gold extended its explosive run to $4,278. This begs the question: will the macroeconomic backdrop aid Bitcoin’s recovery?
Traders are cautious ahead of the Fed’s decision
The US-China rate update remains a key factor for BTC’s near-term price direction. At the same time, expectations of the Fed rate cut could also influence the market.
At the time of writing there is consensus leaned (98% chance) of a further cut of 25 basis points at the upcoming meeting on October 29.
Source: Fed Watch Tool
Historically, cheaper capital or loans coupled with rate cuts have fueled bullish sentiment and risky assets. Despite the Fed being blind and key macro data out of reach due to the government shutdown, the market was confident of another rate cut next week.
Collectively, the macro landscape could improve for the better and reignite bullish hopes in the fourth quarter. Joshua Deuk, Head of Trading at Mozaik Capital, reiterated the same noted,
“We are (eventually) still on the path to easing, and the Fed has ammunition. So unless China drops a nuclear weapon on the US (highly unlikely), the medium-term bias is still strong.”
Important levels to watch out for for BTC
On the tech charts, Bitget CEO, Gracy Chen, says said that the recent sudden crash has affected market sentiment. However, she highlighted the $100k level or the 360-day moving average (MA) as a key support to strengthen the bullish structure if it is defended.
“If $BTC manages to break its ATH, there is still room for upside potential in the first quarter of next year. If not, and it fails at the key support levels (around $110,000/180MA or $100,000/360MA), I may take profits based on technical signals.”
Source: X/Gracy Chen
Such uncertainty was also present in the options market.
Amber dates 25-Risk reversal (25RR) was negative at the time of writing for next week’s expirations, highlighting high hedging activity or demand for put options (bearish bets).
However, options traders can be to expect $100,000 as a price floor and $120,000 as a potential upside target in the fourth quarter.
Source: Velo