Bitcoin’s (BTC) price has been in a down-trend since the $69,000 all-time high on Nov. 10, when the the Labor report showed inflation pushing above 6.2% in the United States. While this news could be beneficial for non-inflationary assets, the VanEck physical Bitcoin exchange-traded fund (ETF) denial by the U.S. Securities and Exchange Commission (SEC) on Nov. 12 threw some investors off-guard.
Bitcoin/USD price on Coinbase. Source: TradingView
While the ETF request denial was generally expected, the reasons given by the regulator may be worrisome for some investors. The U.S. SEC cited the inability to avoid market manipulation on the broader Bitcoin market due to unregulated exchanges and heavy trading volume based on Tether’s (USDT) stablecoin.
Analyzing the broader market structure is extremely relevant, especially considering that investors closely monitor meetings held by the U.S. Federal Reserve. Regardless of the magnitude of the upcoming tapering in the Fed’s bond and assets repurchase program, Bitcoin’s movements have been tracking the U.S. Treasury yields over the past 12 months.
Bitcoin/USD at FTX (orange, left) vs. U.S. 10-year Treasury Yields (blue, right). Source: TradingView
This tight correlation shows how decisive the Federal Reserve’s monetary policy has been with riskier assets, including Bitcoin. Moreover, the yield decline over the past three weeks from 1.64 to 1.43 partially explains the weakness seen in the crypto market.
Obviously, there are cother factors in play, for example, the market pullback on Nov. 26 was primarily based on concerns over the new COVID-19 variant. Regarding derivatives markets, a Bitcoin price below $48,000 gives bears complete control over Friday’s $755 million BTC options expiry.
Bitcoin options aggregate open interest for Dec. 17. Source: Coinglass.com
At first sight, the $470 million call (buy) options overshadow the $285 million put (sell) instruments, but the 1.64 call-to-put ratio is deceptive because the 14% price drop since Nov. 30 will likely wipe out most of the bullish bets.
If Bitcoin’s price remains below $49,000 at 8:00 am UTC on Dec. 17, only $28 million…