Bitcoin open interest in derivatives has risen to nearly $40 billion, according to CryptoQuant, as traders increase leveraged positions ahead of this week’s Federal Reserve policy announcement.
Markets generally expect the central bank to cut interest rates by 0.25 percentage points, following a similar move in September. Weaker jobs and inflation data have reinforced expectations of a slowdown in US growth, while the ongoing government shutdown has slowed the flow of new economic statistics. The Federal Reserve’s statement on Wednesday is expected to outline how it plans to manage monetary policy under these uncertain conditions.
Traders see high probability of another rate cut
Most investors anticipate another quarter-point rate cut, extending the Federal Reserve’s current easing cycle. The decision comes after several months of weaker employment gains and lower inflationary pressures.
Limited data from government agencies due to the shutdown has complicated the Federal Reserve’s analysis, but Chairman Jerome Powell recently signaled flexibility in balance sheet policy to avoid a financial tightening.
On the Myriad prediction platform, traders assign a 92% probability to a 25 basis point cut, reflecting a near-unanimous market expectation.
Leverage increases on Bitcoin derivatives
Bitcoin open interest in futures and options contracts has increased to $37.6 billion, up from $33 billion the previous week. The rise shows that more traders are placing leveraged bets ahead of the Federal Reserve’s decision.
The price of Bitcoin stood near $116,000 on Monday, up from $107,600 last week. While open interest remains below the October 6 high of $47 billion, when Bitcoin touched $126,080, the recent rally indicates renewed activity in the derivatives market rather than a return to speculative extremes.
Analysts expect gradual easing of policies
According to Gracy Chen, CEO of Bitget, markets have already priced in a 25 basis point cut that would bring the target range to 4.00%-4.25%. He said the Federal Reserve’s decision process remains independent of the fiscal situation, suggesting the current government shutdown is unlikely to alter the outcome.
Chen added that Powell may indicate a gradual approach to future rate cuts, maintaining favorable liquidity conditions if inflation continues to slow.
Bitcoin Holds Key Support Ahead of Fed Announcement
Chen noted that Bitcoin’s recent rally is supported by steady inflows into exchange-traded funds and increased activity in derivatives markets. The cryptocurrency has found short-term support around $112,000, with traders eyeing the $118,000 to $120,000 range as the next key resistance zone.
However, he warned that total leverage approaching $40 billion could trigger strong volatility if the Federal Reserve takes a more cautious tone than investors anticipate.
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