According to QCP Capital, a full-service trading firm for crypto assets, Bitcoin (BTC) risk reversals traded in positive territory across numerous tenors for the first time since 2021 last week. This is quite unusual, as BTC normally exhibits continuous Buy bias due to miners and treasury hedging activities.
It also demonstrates how rapidly market sentiment has shifted from negative to bullish, a reflection of what has been occurring on the macro market level. In contrast, the implied volatility (IV) of Ethereum (ETH) has decreased, signaling complacency as the market prices out the risk of a price collapse.
In light of the Shanghai Upgrade, which would result in the unlocking of more than 16 million ETH, one would anticipate that the ETH price towards the end of March IV would remain quite high.
What to Expect for the Crypto Market
According to QCP Capital, trading desk flows are also exhibiting FOMO, with traders chasing the top side by purchasing high delta calls and going long spots this week. So what could disrupt the market’s upward trend?
First, upward momentum must wane, and QCP Capital believes the market will be a little more cautious in the week leading up to the FOMC meeting. Consequently, the upcoming FOMC meeting on February 1 will consist of a statement followed by a Powell news conference, and the market has signaled to the Fed that words are cheap.
Consequently, we must once again rely on the CPI for guidance. Here is where the situation becomes potentially concerning. The next CPI, which will be issued on Valentine’s Day, February 14, according to QCP Capital, has the potential to crush the bulls’ hearts.
The Cleveland Fed’s Nowcast inflation model is tracking at an astounding 0.58% M/M, which indicates. 0.6% M/M is the official ratio if they are correct.
Officially, Core is not any better at 0.46% M/M or 0.5% M/M. This is a staggering figure that completely contradicts the market’s positive outlook on inflation, as we’ve already discussed.
However, because this model is based on a daily Nowcast, it is possible that it will be revised much lower as the end of the month approaches. The market will undoubtedly start paying closer attention to this as the FOMC meeting begins the following week.
