Key Takeaways
Will the Santa Claus rally be cancelled?
At the time of writing, the market had not priced in such an outcome; However, the Fed’s interest rate decision will be an important catalyst.
What’s next for BTC in the meantime?
Likely to see choppy price action above $80,000 until the Fed’s rate decision in early December.
After a brutal 30% drop, Bitcoin [BTC] has remained stable above $80,000, while the probability of another Fed rate cut increases by 25 basis points.
However, despite the relief, expectations of the ‘Santa rally’ have dropped Jake Ostrovskis, head of OTC (Over the Counter) trading at market maker Wintermute.
He mentioned the market positioning of Options and added,
“The previously consensus view of a year-end ‘Santa rally’ has been priced out of the markets. Calls continue to fall, topside bets are capped below all-time highs.”
Source:
It meant that big players like Paradigm had their calls (bullish bets) shortened and targets pushed down, underscoring that big funds weren’t expecting an explosive move towards a new ATH in December.
He said options traders had pegged a mildly bullish prospect of a jump to $100,000-$118,000, but nothing like an aggressive spike to the recent peak of $126,000.
BTC sentiment and momentum
That said, the 25th Delta Risk Reversal (25RR), which tracks market sentiment, was negative for the end of November (-4.8) and December (-4.9). This highlighted a premium for putting or hedging activities until the end of the year.
Source: Amberdata
In other words, there was still short-term caution, despite the increasing chances of a Fed rate cut. For Ostrovskis, a real Bitcoin bottom could be formed if the 25RR falls to at least neutral (zero).
However, for November, the top volumes for puts (hedging) were at $80,000, $82,000 and $88,000, further reinforcing expectations that the market still expected the price to defend the $80,000 support.
But most of all for December bullish bets in the past 24 hours they were targeting a potential rally to $112,000.
Source: Arkham
Still, Swissblock stated that despite BTC’s recovery to $89,000 earlier this week, momentum had not turned positive.
The analytics company added that defending $85,000 could raise hopes of moving up.
“It (momentum) remains deeply negative, at levels typical of late-stage capitulation. Until momentum reverses, any bounce is merely a tactical response. An ignition becomes possible if BTC stabilizes above $85,000 – $86,500.”
Source: Swissblock
On the demand side, ETF inflows were uneven earlier this week. This choppiness has limited momentum and could cause BTC to trade sideways in the short term.
Looking ahead, the Fed’s upcoming interest rate decision could determine whether the trend stabilizes or changes direction.
Nic Puckrin, an analyst at The Coin Bureau, shared a similar view. In an email statement to AMBCrypto, he said:
“The Fed holds the key to the market’s year-end finale – and its next interest rate decision will determine whether we get a Santa rally or a Santa dump.”