Market Wrap: Bitcoin’s Powell-Induced Price Swing; Ethereum Still High on Gas

Bitcoin’s rally lost power after a speech by the Federal Reserve chief; Ethereum gas usage hits another record.

  • Bitcoin (BTC) trading around $11,251 as of 20:00 UTC (4 p.m. ET). Slipping 1.8% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $11,130-$11,596
  • BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

btcaug27Bitcoin trading on Coinbase since August 25. Source: TradingView

Thursday featured a highly anticipated speech by Federal Reserve Chair Jerome Powell highlighting U.S. dollar inflation. During the hour Powell spoke, spot bitcoin hit as high as $11,596 on Coinbase. However, it lost steam and dropped $466 to $11,130 before New York traders were eating their lunch.

Singapore-based QCP Capital wrote in an investor note that Thursday’s failed bitcoin rally was a result of the substance, or lack thereof, of Powell’s comments. “Powell’s backpedaling and fuzzy inflation framework has disappointed the market that was hoping for a formalization of inflation policy in this speech itself,” the firm wrote.

The Fed inflation framework, which in Powell’s words is “flexible,” is a positive sign, said Neil Van Huis, director of institutional trading at crypto liquidity provider Blockfills. “Although the market reacted to Powell’s comments, I have to believe anyone really thinking hard about it knew this was a likely response by him,” said Van Huis. “One in the digital asset space might be smiling even more now, saying ‘this thing we are building might actually be working,’” he added.

The bitcoin market may see more exciting action Friday, when over 66,400 BTC in open interest options are set to expire.

skew_btc_options_open_interest_by_expiry_k-5Bitcoin options open interest and expiration dates.Source: Skew

William Purdy, an options trader and founder of analysis firm PurdyAlerts, expects volatility to rise as a result. “What large open interest means is that there is more money on the line by institutions and retail with strong financial incentives to move prices to or away from certain prices as we move into that expiration,” he explained.

“The two strikes with the greatest open interest are at $11,000 and $12,000,” said Purdy. He thinks spot prices could further gyrate because buyers of options would have gains minimized inside that $11,000-$12,000 range.

Options traders had a small scare when Deribit, the largest bitcoin options exchange, went offline during early European trading hours. At one point, Deribit warned it was possible it wouldn’t be back online in time to handle the 2,000 or so bitcoin options that were expiring Thursday. However, the problem was resolved a few hours later.

Gas at all-time high

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Thursday, trading around $378 and slipping 2% in 24 hours as of 20:00 UTC (4:00 p.m. ET).

Total gas, a unit of account for transactions and smart contract usage on the network, used on Ethereum per day hit 79,294,223,632 units on Sunday, an all-time high. Wednesday was the second-highest gas day, with 79,255,713,214 used.

ethereumgasalltime

Total gas used on Ethereum since the network launched. Source: Glassnode

Marc Fleury, CEO of crypto asset brokerage Two Prime, says Ethereum-based DeFi could be a disruptive game changer for finance in uncertain times, if the network’s congestion problems can be solved by the community. “DeFi lending and yield creation in the crypto space has the potential to disrupt traditional banking,” said Fleury. “Let’s not squander this opportunity.”

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