The cryptocurrency market is experiencing a significant downturn as investors anxiously await Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole Symposium on Friday.
Recent days have witnessed a considerable shift in sentiment, with a net outflow of $1.9 billion from Bitcoin and Ether exchange-traded funds (ETFs) over the past four trading sessions.
This marks a sharp reversal from the recent rally that propelled Bitcoin to a record high on August 14th and Ether to near its all-time peak. The momentum fueled by corporate crypto accumulation strategies, reminiscent of Michael Saylor’s approach, appears to be waning.
Adding to the market’s apprehension is a notable increase in defensive trading activity in the options market. On Deribit, the put-to-call ratio for August 22nd contracts surged to 1.33, with a substantial $3.8 billion in Bitcoin options expiring.
The high concentration of open interest in $110,000 puts suggests widespread concern about a near-term price correction, as traders seek downside protection. This heightened demand for put options, which grant the right to sell at a specified price, underlines the market’s nervousness.
Analysts attribute this market uncertainty to the impending speech by Jerome Powell. Peter Chung, head of research at Presto, highlights that given expectations of rate cuts in September, the market is more vulnerable to a hawkish tone from Powell than a dovish one.
The recent market volatility, he explains, reflects investors positioning themselves for a potentially unpredictable outcome of the speech. This sentiment is further reinforced by the minutes from the Fed’s last policy meeting, which underscored the Fed’s continued focus on inflation risks over employment concerns, even with the anticipated impact of new tariffs.
Consequently, Bitcoin has experienced a significant 9% drop from its record high, trading around $113,100, while Ether has fallen by 1.7% to $4,280.
The market’s current trajectory underscores the considerable weight investors are placing on Powell’s upcoming address, highlighting the significant influence of Federal Reserve policy on the cryptocurrency market.
