High-Stakes Week For Bitcoin And Ethereum As Central Bank Decisions Approach: Key Predictions

This week could mark a pivotal moment in the first quarter of 2024 for the entire crypto market and the two largest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), as major central banks, led by the Bank of Japan and the US Federal Reserve (Fed), prepare to announce their interest rate decisions. 

According to crypto futures exchange Blofin, these announcements will set the tone for monetary policy in the coming months. The impact of safe-haven sentiment has led to a pullback in both BTC and ETH prices, with traders expressing greater optimism for BTC. 

As per a recent on-chain analysis report released by the exchange, crypto traders are expecting BTC’s price movement range to reach 9.78% over the next seven days, with a projected 30-day range of 20.33%. 

However, despite the expected volatility, the report indicates that traders remain bullish on BTC in the medium to long term. 

Skewness analysis suggests that price declines and pullbacks are expected to induce volatility, but the duration of this round of pullback is expected to be relatively short. Risk aversion to macro uncertainty is seen as the primary trigger. 

The latest dealers’ gamma distribution supports the expected wide range of BTC price fluctuations, with gamma peaks around $65,000 and $75,000. With the quarterly settlement approaching, market makers’ influence on BTC price movement is gradually recovering, providing support during price drops but making it challenging to surpass the $75,000 level. 

In addition, on-chain data shows a decline in spot investors’ enthusiasm for buying BTC, although the number of addresses holding more than 100 BTC continues to increase, as seen in the chart above. The reduced number of addresses holding over 1,000 BTC suggests that significant holders have decided to sell at BTC’s new highs. 

Despite caution over potential price fluctuations, the hedging effect contributes to the increasing possibility of BTC price stabilization, making holding BTC a favorable choice.

According to the report, similar to BTC, traders expect relatively high volatility levels for ETH in the short term, with projected price movement ranges of 10% over seven days and 20.32% over 30 days. However, the report suggests that traders are less optimistic about ETH’s future performance compared to Bitcoin. 

Furthermore, Blofin finds that bearish sentiment dominates the front-month options, while bullish sentiment remains favorable in the back-months. Blofin emphasizes that expectations of rate cuts may support the ETH price, but the pricing of Ethereum tail risk indicates “increased pessimism” regarding significant events impacting the ETH price, with spot Ethereum ETFs seen as a potential trigger. 

Finally, Blofin explains that the high leverage of altcoins has long been a “source of risk” in the cryptocurrency market. The recent price decline has led to the liquidation of many highly leveraged altcoin positions, resulting in lower annualized funding rates for perpetual contracts. 

This deleveraging of altcoins, coupled with their relatively small market share of less than 20%, has helped to mitigate risk and contribute to market stability, according to the report. However, despite the overall decline in altcoin leverage, speculation in meme coins continues.

At present, the price of Bitcoin stands at $62,500, reflecting a significant decline of 7.5% within the last 24 hours. Similarly, Ethereum is trading at $3,276, experiencing a 6.8% drop during the same period.

Featured image from Shutterstock, chart from TradingView.com