The latest moves in crypto markets, in context By Lyllah Ledesma, CoinDesk Markets Reporter Was this newsletter forwarded to you? Sign up here. |
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Good morning. Here's what's moving in crypto today: |
- Bitcoin and ether are down ahead of the Fed's expected interest rate hike.
- Crypto companies continue to cut staff as crypto winter get chillier.
- Ether is on its way to becoming a deflationary asset, according to Citi.
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Bitcoin is trading down slightly as markets brace themselves for the U.S. Federal Reserve's announcement later Wednesday. The Fed is expected to raise interest rates by 75 basis points to a range of 3.75% to 4%, which would be the highest level since 2008. While U.S. stocks slipped in advance early Wednesday, one trader is recommending short-term options "straddles" in bitcoin and ether to benefit from potential price swings – more on this in the Market Insight below. |
Crypto companies continue to lay off staff as crypto winter approaches the actual winter. Crypto venture-capital company Digital Currency Group cut 13% of its staff, Bloomberg reported (DCG is the parent company of CoinDesk), and cryptocurrency exchange BitMEX also reduced its workforce as it pivots to derivatives trading. While the extent of the layoffs wasn't disclosed, BitMEX dismissed a report suggesting that it had let go 30% of its staff. Ether is heading toward a deflationary future, according to Citigroup. In a research report, Citi noted the cryptocurrency's volatility dropped to historic lows in the wake of the Merge, which moved the Ethereum blockchain to a more energy-efficient proof-of-stake consensus mechanism. That resulted in net issuance of ether falling close to zero, whereas before the Merge, annual inflation of supply was around 4.2%, the report said. |
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Market Insight: The Crypto Straddle |
What markets will do in the wake of the Fed's announcement on Wednesday is anyone's guess, but one investment strategy takes advantage of increased volatility, regardless of direction. In anticipation of wild swings in the price of bitcoin and ether, investors can consider a "straddle" option strategy, which profits from an increase in price turbulence. Markus Thielen, head of research and strategy at crypto-services provider Matrixport, recommended ether options "straddles," which involves purchasing both bullish call AND bearish put options with the same expiry date and at the same level or strike price. Buying a straddle means you're hoping the underlying asset will either surge or tank enough to recover more than what you paid to purchase the strategy. |
Bitcoin's annualized three-month implied volatility has slipped to nearly 50%, a level seen only five times since 2020, which might mean a more volatile period, ripe for a straddle strategy, is right around the corner. That said, straddles aren't without risks. A trader can lose the entire amount paid to purchase the call and put options if the market stays flat. Read the full story by Omkar Godbole. |
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- Matrixport's Markus Thielen put together this chart, which shows year-on-year changes in the dollar index (DXY) since 1992.
- As of Wednesday, the DXY is up 20% year-on-year. In the past, rallies of that magnitude have marked major tops.
- A potential bearish turnaround in the greenback may bode well for risky assets, including cryptocurrencies.
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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. |
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