- The US Fed has warned traditional banks of liquidity risks while dealing with crypto exchanges.
- Bitcoin bulls are looking to rake up $200 million in the options expiry later today for the month of February.
One of the major concerns to Bitcoin (BTC) and the crypto asset class, in general, is the possibility of the Fed announcing future rate hikes with stick inflation around. If the Federal Reserve turns aggressive with its monetary tightening measures, it could derail the rising momentum of crypto assets.
In its latest development, the US Federal Reserve warned all national banks over the liquidity risks from the crypto market’s instability and the mass sell-off incidents that follow after. The US Fed, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency gave a joint warning on the matter.
This statement comes at a time when the regulatory bodies in the US continue to tighten their grip on the crypto market. The nation’s topmost regulator U.S. Securities and Exchange Commission (SEC) has proposed some rule changes regarding asset custody by companies across sectors.
In their joint statement, the US Federal Reserve mentioned two types of risks for banking institutions associated with digital assets. The first involves the risk of crypto asset deposits made by crypto exchanges on behalf of their customers. Similarly, the second risk is linked to deposits that constitute stablecoin reserves.
As a result, the FED has recommended some effective risk management strategies against liquidity risks. It has further alerted financial institutions regarding unpredictable volatility in the market. The Federal Reserve noted:
The stability of the deposits may be influenced by, for example, periods of stress, market volatility, and related vulnerabilities in the crypto-asset sector, which may or may not be specific to the crypto-asset-related entity.
Bitcoin Bears Vs Bulls
Later today, February 24, $1.9 billion in BTC options are set to expire. It has been a tough fight between the bears and the bulls after Bitcoin gave a surprise 16% price rally between Feb. 13 and Feb. 16.
Before this, the bears were having an expectation of a monthly options expiry under $21,500. But while BTC surged past strong last week, the bulls have been facing strong resistance at $25,200. This reduces the odds of the bulls securing a $500 million profit in this month’s Bitcoin options expiry.
The major concern for the Bitcoin bulls going ahead would be the stricter monetary policy with the US Fed increasing interest rates in the future. The recent FOMC meeting on February 22 shared a common consensus that the Fed could continue to raise rates as long as it sees necessary.
The open interest for the options expiry ahead today is $1.91 billion. However, the actual figure could be lower as the bears expected the BTC price to be under $23,000. But the BTC’s surprise rally last week stumped the bears.
The call-put ratio is currently at 1.55 which reflects the imbalance between the $1.16 billion call (buy) open interest and the $750 million put (sell) options. As of press time, BTC is trading close to $24,000 and bulls can book a $200 million profit in this options expiry.
