(Bloomberg) — The speculative frenzy around Bitcoin since Donald Trump’s US election victory is moderating both in the spot and derivatives markets.
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The largest digital asset slid below $87,000 at one point on Friday after Federal Reserve Chair Jerome Powell said there was no need to hurry interest-rate cuts. That left the token about $6,500 below a record high set on Wednesday.
In the derivatives sector, K33 Research said the premium paid for CME-listed Bitcoin futures over the spot market price has declined. US-based institutional investors use the contracts to take positions on the original cryptocurrency. Figures from Amberdata indicate a 24-hour surge in open interest — or outstanding contracts — for bearish options with a strike price of $80,000.
“Markets seems to be cooling down,” said Vetle Lunde, head of research at K33, adding that the narrowing of the futures premium “might have been a subtle hint of moderating risk profiles.”
Trump’s Pledges
Bitcoin has jumped about 30% since the US election on Nov. 5. in response to President-elect Trump’s pro-crypto stance. The digital asset is now viewed as one of a suite of so-called Trump trades, and speculators are wondering how much impetus the rally has left.
Trump has pledged to create a friendly regulatory framework for crypto, set up a strategic Bitcoin stockpile and make the US the global hub for the industry. A onetime crypto skeptic, Trump changed tack after digital-asset firms spent heavily during election campaigning to promote their interests. Questions remain about the feasibility and implementation timeline of his promises.
Investors poured a net $4.3 billion into US spot-Bitcoin exchange-traded funds after Election Day. The 12 funds, from issuers including BlackRock Inc. and Fidelity Investments, now have total assets of about $93 billion, based on figures compiled by Bloomberg.
Volatility Expected
“It’s all pure speculative trading right now,” said James Davies, chief executive officer at on-chain futures and options trading platform Crypto Valley Exchange. “Expect lots of volatility and a lack of clear signals for a while, whilst we wait for policy announcements in the US.”
Davies flagged $90,000 as a key marker to watch to see if acts as a “resistance level, or if we are well past it.” One of the highest concentrations of bullish Bitcoin options bets is for the $100,000 strike, data from Deribit show.