After setting a new 2023 high on Monday, bitcoin fluctuates mostly sideways at around $34k. The market’s expectations for the first spot bitcoin ETF in the U.S. to get approved by the SEC has exploded again on Monday as it was found out that the ticker symbol for Blackrock’s bitcoin ETF, IBTC, has been up on DTCC’s website since this August. Blackrock last week revealed in their amendments to spot bitcoin ETF application that they had carried out sales of seed funds for the bitcoin ETF to their affiliates in October. $35k has proven to be a hard resistance for bitcoin and the price has lost its direction, but it may still possess a significant upside risk and could potentially reach somewhere around $40k in the short term. In the midst of bitcoin ETF fever this week, bitcoin’s option market saw a surge in open interest for the $40k strike call option that expires in December. This goes to show that the option market is pricing in a continuation of bitcoin’s rally, and in case the price goes up again, those who are shorting $40k strike call option would have to long bitcoin inorder to hedge their position.
On the other hand, the FOMC is coming up next week and the market’s atmosphere could drastically change. Recent economic data have demonstrated the U.S. economy’s strength, so a likely scenario is that the Fed will keep its policy rate unchanged but chair Powell will try to counter market’s expectation that rate hikes are over at his press conference. This will likely lead to another rise in treasury yields, but for the Fed, that could restrain the economy without actually raising policy rates: so two birds one stone. This is why bitcoin’s potential significant upside risk has a short expiration date: it could print another leg up in the next couple of days and then enter a correction phase, or it could stay at the current level until next week’s FOMC and then start to pull back.