Bitcoin (BTC) rose to its highest point since Aug. 22 on Wednesday, reaching $117,300 before receding to $116,400.

Much of Wednesday’s excitement is yet to come, hinging on the Federal Reserve’s interest-rate decision at 18:00 UTC and subsequent press conference. The Fed is expected to cut rates by 25 basis points,

The early move was intriguing because it stopped at the same point as a notable “CME gap,” the disparity between where bitcoin futures close on a Friday and open on a Sunday.

With that gap now filled, bitcoin could begin to consolidate in a range away from critical levels of support at $110,000, this will likely lead to more capital rotating into altcoins.

According to CoinMarketCap data, bitcoin dominance has ticked down to 57%, the lowest point since January, suggesting the market is leaning toward speculative altcoin plays as opposed to BTC in a period of low volatility.

Derivatives Positioning

• BTC futures open interest across major venues has crept up to $32 billion over the past week.
• At the same time, the three-month annualized basis has started compressing again to roughly 6-7% across Binance, OKX and Deribit, leaving the carry trade only marginally profitable.
• While the OI growth suggests increasing activity and engagement in the market, the narrowing basis indicates that directional conviction, particularly on the bullish side, is weakening, with traders less willing to pay a high premium for future exposure.
• The options data also presents a complex picture of market sentiment.
• While the BTC Implied Volatility Term Structure chart shows an upward-sloping curve, suggesting the market expects long-term volatility to be higher than short-term, other metrics point to a more immediate bearish outlook.
• Specifically, the 25 delta skew chart indicates that the skew is either flat or slightly negative for shorter-term options (1-week, 1-month), which means traders are paying a premium for puts over calls to gain protection against declines.
• This short-term bearish sentiment is directly contradicted by the 24-hour put-call volume chart, which shows a higher volume of calls than puts, indicating that over the past 24 hours most options traders were positioning for a price increase.
• Funding rate APRs across major perpetual swap venues have recently started to show some pickup with BTC annualized funding currently at 17%.

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Author: Oliver Knight