Yesterday (31 JAN), the Federal Reserve held its first FOMC meeting of the new year, announcing it will keep the current interest rates unchanged, in line with market expectations. Following the meeting, Fed officials made hawkish statements, indicating they would not cut interest rates until they are more confident inflation is moving sustainably towards 2% and removed the phrase “might require further tightening” from their statement. Chairman Powell explicitly mentioned that “a rate cut in March is unlikely,” seen as a direct rebuttal by the Fed against the market’s growing expectations for a more dovish policy. The swap market’s expectations for a rate cut in March have now dropped to 36%. In terms of Treasuries, despite the lower-than-expected increase in ADP employment numbers (recording 107,000 versus the expected 145,000) and a slightly lower-than-expected labor cost index pushing yields down, hawkish comments during the FOMC meeting drove yields up again. On the other hand, the U.S. Treasury hinted it’s unlikely to increase issuance size before next year, boosting demand for Treasuries and leading to a subsequent decline in yields, with the two-year/ten-year currently at 4.231% / 3.942%. The three major U.S. stock indices were under pressure and closed down, with the Dow Jones/S&P/Nasdaq falling by 0.83% /1.6% /2.2% respectively, erasing a full week’s gains in just a few minutes and marking the largest single-day drop of the year so far.

Source: SignalPlus, Economic Calendar
Source: Binance & TradingView

Cryptocurrencies, as risk assets, also faced downward pressure, with BTC falling to around $42,000 and ETH to about $2,270. The large-scale bullish strategy trades stimulated by the consecutive rises in the previous days lost their momentum today. The market trading volume decreased over the past 24 hours, and the Put Spread strategy for February took its place as the focus of the market yesterday. The Vol Skew that had just started to rise in the mid-front end has returned to near zero, and the overall volatility levels of both BTC and ETH have gradually declined after the FOMC meeting, dropping by about 3–4% Vol.

Source: Deribit (As of 31 JAN 08: 00 UTC)
Source: SignalPlus
Data Source: Deribit
Source: SignalPlus
Source: Deribit Block Trade
Source: Deribit Block Trade

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