The Fed has little ammo left as $30K Bitcoin price becomes key battle line

The Bitcoin price successfully defended the $28,000 support on May 2, but it has yet to prove the strength needed to reclaim the $29,200 level from April 30.

$30K becomes crucial for Bitcoin bulls

Some analysts will pin the recent downtrend on the expectation of an interest rate increase by the United States Federal Reserve on May 3, but in reality, the market is pricing 92% odds of a modest 25-basis-point increase to its highest level since September 2007.

Moreover, the Bitcoin futures premium has stagnated near 2% since April 23, suggesting that buyers are unwilling to use leverage, which is healthy for the market. By avoiding futures contract exposure, it greatly reduces the risk of large liquidations during negative Bitcoin price moves.

Bitcoin options traders remain neutral

The Bitcoin options market can also help a trader understand whether a recent correction has caused investors to become more optimistic. The 25% delta skew is a telling sign when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.

The option delta’s 25% skew has shown balanced demand between call and put options for the past four weeks. That should come as a surprise given that the Bitcoin price rallied 10% between April 25 and April 30, when it last tested the $30,000 resistance.

Consequently, Bitcoin options and futures markets suggest that professional traders are not placing their chips on the BTC price breaking above $30,000 anytime soon. On the other hand, those whales are pricing in similar odds of surprise positive and negative moves.

Ultimately, given that the Fed clearly has a limit to raising interest rates without causing a recession, Bitcoin’s price should be positively impacted, regardless of the decision on May 3.

Fed chair Powell will ultimately force the U.S. Treasury to inject more money into the economy to contain the banking crisis, which will be beneficial for a scarce asset such as Bitcoin.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.