Bitcoin (BTC) broke below $35,000 after the Nov. 2 Wall Street open as analysis warned of “overheated” derivatives.
Bitcoin undoes post-Fed gains
The largest cryptocurrency had hit new 18-month highs of $35,968 on Bitstamp before consolidating — a process which was gathering momentum at the time of writing.
The highs had come on the back of encouraging language from Jerome Powell, Chair of the United States Federal Reserve, who in a speech suggested that interest rate hikes might soon end.
The Fed opted not to change rates at the latest meeting of the Federal Open Market Committee, or FOMC, on Nov. 1.
“Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated,” an accompanying press release stated.
“The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
As Cointelegraph reported, $35,000 quickly became a key BTC price support level to hold for market participants once reached. The area above $34,500, meanwhile, was described as an “ideal” target for a local low.
#Bitcoin breaks out and reaches a new yearly high.
— Michaël van de Poppe (@CryptoMichNL) November 1, 2023
Now down over $1,000 from its highs, however, Bitcoin was worrying some, with derivatives markets particularly in focus.
“All Bitcoin derivatives markets are overheated at present,” Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments, wrote on X alongside Capriole’s own data.
“This captures Perps, Futures and Options. Stay safe out there….”
Reacting, popular trader Skew agreed, arguing that it was now spot markets in charge of saving BTC price strength.
“Something to be aware of when sizing up positions currently,” he told X subscribers.