Dec. 19, 2024

CoinDesk 20 Index: 3,673.94  -4.85%
Bitcoin (BTC): $102,149.10  -2.47%
Ether (ETH): $3,687.90   -4.52%
S&P 500: 5,872.16  -2.95%
Gold: $2,612.93  -0.95%
Nikkei 225: 38,813.58  -0.69%

Bitcoin recovered some ground from Wednesday's slump to creep back above $102,000. BTC was trading at just under $102,500 at the time of writing, 3.63% higher than its 24-hour bottom of about $98,900, according to CoinDesk Indices data. The Fed cut rates by 25 basis points to the 4.25%-4.5% range and hinted at just two 25 bps cuts in 2025, which saw the crypto market nosedive with over $700 million in bullish bets liquidated. “Although an interest rate cut would normally have a bullish reaction since it was largely expected, the market strongly reacted after Fed Chair Jerome Powell stated that inflation would be a continuing problem throughout the next year," Nick Ruck, director at LVRG Research, said in a Telegram message to CoinDesk.

Crypto traders' initial worries about a hawkish Fed materializedas Chairman Jerome Powell cut interest rates and the bank's dot plot signaled only two rate cuts next year instead of the expected three. Bitcoin's seven-day call-put skew shows that Deribit-listed put options offering downside protection and expiring in one week are trading at the highest implied volatility premium to call options since September, according to data source Amberdata. The dour sentiment is also evident from the negative one-month skew, reflecting a bias for puts and a significantly weaker call bias in options ranging from two to six months. These calls traded at a 3 vol premium to puts at press time, down from the 4-5 vol premium observed early this month.

BTC's rise to record highs earlier this week is expected to allow miners to extend their November profitability into December, according to a Wednesday report from investment bank Jefferies. Bitcoin mining economics improved last month as the average price of bitcoin was 31% higher while the average network hashrate rose by almost 4%, the report said. The hashrate, representing the total computing power dedicated to a network, is a proxy for competition in the industry and mining difficulty. "Average daily revenue per exahash was $55,649, which represented a 20.7% month-on-month increase," analysts Jonathan Petersen and Jan Aygul wrote.

The Fed's hawkish outlook on Wednesday saw BTC briefly drop below $100,000, U.S. equities slide around 3% and the dollar index climb to a two-year high of 108, which continues to put pressure on currencies worldwide.

The most significant movement came from the CBOE Volatility Index (VIX), Wall Street's so-called fear gauge, which skyrocketed 74%, the second-largest one-day jump in its history and the steepest since Feb. 5, 2018. The VIX serves as a measure of market fear and expected volatility over the next 30 days

Historically, significant spikes in the VIX have marked local bottoms for both bitcoin and the S&P 500. On the day of the 2018 spike, when the VIX surged by 116%, bitcoin plunged 16% to $6,891, which turned out to be a local bottom. By Feb. 20, prices had rebounded to over $11,000.

A similar pattern has played out consistently in the S&P 500 over the years. At press time, BTC traded above $102,000 while the S&P 500 futures pointed to a positive open with a 0.37% gain.

- Omkar Godbole