- Bitcoin’s flash crash shows Fed policy and whale moves drive August volatility.
- The options market shows caution as traders seek downside protection with hedges.
- Ethereum gains traction as institutions rotate from Bitcoin, eyeing higher upside.
Bitcoin (BTC) experienced a rapid decline over the weekend, briefly falling below $111,000 after a combination of macroeconomic cues and aggressive market activity. The drop erased gains made following U.S. Federal Reserve Chair Jerome Powell’s speech at Jackson Hole. Meanwhile, Ethereum (ETH) showed resilience, buoyed by institutional interest and speculative positioning in anticipation of a potential rate cut.
Following a dovish speech by Fed Chair Jerome Powell on Friday, BTC initially rallied nearly 4%, rising from $112,500 to $116,900. Powell’s remarks, which downplayed inflation concerns stemming from trade tariffs and hinted at the possibility of rate cuts, triggered a broader risk-on sentiment across equities and digital assets.
However, this momentum reversed abruptly during the weekend as a massive transaction involving 24,000 BTC, valued at around $2.7B, was executed by a single whale. Blockchain data from Sani confirmed the whale sent the entire balance to the Hyperunite exchange, with 12,000 BTC transferred on Sunday alone. This movement occurred during a period of low liquidity, and BTC dropped from $114,666 to $112,546. The prices briefly dipped to below $111,000, then settled at about $112,800 on Monday.
The liquidations that ensued amounted to over $550 million spread across the key cryptocurrencies, with the highest being BTC and ETH at $238 million and $216 million, respectively. This is indicative of the still sensitive nature of high leverage positioning in the digital assets markets, with any shearing movement causing exchanges to close out over-exposed traders.
Further analysis revealed that the whale’s holdings originated from HTX nearly six years ago and had remained dormant until these recent transfers. The addresses associated with the entity still control approximately 152,874 BTC.
Derivatives Markets Signal Caution
TOptions data on Deribit signals caution among traders. The 25-delta risk reversals, which measure the difference in pricing between call and put options, remain negative through December. This means traders are still paying more for downside protection, showing demand for hedges against potential drops, even as they position for further upside.
This counterintuitive movement in price at spot and options shows that traders are not yet certain of the more macroeconomic cues. The continued skew of negative BTC options indicates a defense-oriented approach and unwillingness to engage in a bullish trend without additional market structure support or the support of macroeconomic trends to emerge.
The rhetoric of Powell addressing the situation as dovish and the movement of whales selling and hedging options against it point to a complicated interrelation between the outside markets and internal forces within the crypto market. It also highlights how policy expectations are insufficient to push it higher when the situation is highly technical or driven by liquidity.
Related: Bitcoin Slides Below $113K, Key Signals Hint at Next Move
Ethereum Benefits from Market Rotation and Institutional Interest
In contrast to Bitcoin’s volatility, Ethereum has demonstrated notable strength, trading at $4,707, up 9% over the past week. Analysts attribute this outperformance to a possible rotation by institutional players and whales from BTC into ETH, as they bank on Ethereum’s higher relative upside in a rate-cut-driven liquidity environment.
According to BTSE COO Jeff Mei, Ethereum’s smaller market cap and broader use cases may allow it to respond more strongly to additional monetary easing. The same feeling has been expressed by Augustine Fan of SignalPlus, who said that the assets held in the ETH treasury have also increased, and the BTC/ETH ratio has improved, indicating that people are increasingly demanding Ethereum in their portfolios.
Additional drivers of the momentum are treasury allocations and the growing usage of Ethereum to support smart contracts, stablecoins, and tokenization. At least, Ethereum is becoming the blockchain of choice among Wall Street institutions, noted by Hashdex CIO Samir Kerbage in pointing toward these trends.
