The latest macroeconomic data from the US revealed that the PPI increased more than expected. While the expectation was 1.6%, the PPI was announced as 1.8%. The statement from the US Bureau of Labor Statistics (BLS) stated, “The final demand index excluding food, energy, and business services increased by 0.1% in September, which was below the 0.2% increase in August. On an annual basis, prices increased by 3.2%.”

This development poses a new challenge for the Federal Reserve, as it follows the Consumer Price Index (CPI) data, which shows increasing inflation pressures. The Kobeissi Letter argued that the Fed’s 0.5 point rate cut last month was unnecessary, saying, “Both Core PPI and CPI inflation are on the rise again.”

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Bitcoin, which benefited from the Fed’s rate cut decision in recent weeks, performed differently than the stock market this week. While cryptocurrencies and risky assets experienced selling pressure following the PPI data, stocks rose.

According to CME Group’s FedWatch tool, expectations for a possible rate cut in November remained unchanged. The probability of a 0.25 point rate cut was close to 84%, while the probability of interest rates remaining stable was around 17%.

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A put-call ratio below one signals a bullish sentiment, indicating that call volume surpasses put volume. Notably, the bitcoin put-call skew remains negative as of May and beyond, implying relatively higher costs for calls, indicative of bullish sentiment.

Deribit CEO Luuk Strijers confirmed this trend, highlighting that the market continues to value calls more than puts for the June 2024 period. Despite recent declines in bitcoin’s price, Strijers emphasized that the options landscape remains consistent with previous halvings, suggesting that the positive impact on prices may require some time to materialize.

Strijers underscored that despite short-term fluctuations, the market sentiment has not turned bearish, emphasizing bitcoin’s sensitivity to macroeconomic factors, which may exert temporary downward pressure.

Regarding the concentrated selling of May-expiry calls at an $80,000 strike price, QCP Capital analysts noted this activity. Strijers attributed this to a reduction in basis yield from nearly 20% annualized to 10%, impacting traders holding high strike price calls. Consequently, some investors might have shifted towards selling out-of-the-money calls for premium income, contributing to a decrease in implied volatility levels.

While acknowledging a decrease in bitcoin’s trading range dampening earlier excitement in the derivatives market, Strijers highlighted that the basis yield remains positive and relatively high.

However, Bitfinex analysts suggest a potential shift in sentiment as investors start selling high strike price calls, possibly influenced by recent declines in large-cap equities like Meta and Tesla. This reassessment in the options market may reflect participants adjusting their expectations and taking profits or cutting losses ahead of the summer.

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According to the daily liquidation heat map in Bitcoin trading, it appears that there will be a serious liquidation clustering at the 51,450 to 51,600 fiat levels. On the other hand, there is a notable liquidation gathering also at the 50,450 price point.

When addressing this situation, it is necessary to underline the decisive importance of the direction in which the fiat moves for investors. The liquidations accumulating heavily in the 51,450 to 51,600 price range or the liquidation accumulations at the 50,450 level can give an idea about the direction of the market.

Both situations provide hints when evaluated in terms of investors and trading strategies. However, it should not be forgotten that such predictions certainly involve risk, and all investors need to make their risk assessments. Therefore, the guidance of the liquidation heat map should be supported with extensive research.

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