The crypto-currency market continues to remain gloomy due to the hawkish attitude of the Federal Reserve. Bitcoin remains stuck in the $18,000 to $19,000 range. According to Jason Goepfert, a leading crypto influencer, traders are expecting a complete crypto crash.
According to Jason Goepfert, investors spent nearly $20 billion last week to buy put option protection. He reveals that this is a record high. He reveals that leveraged traders expect that a crypto crash is imminent.
Why a crypto-currency crash is almost certain?
The Federal Reserve has taken an extremely aggressive stance to curb runaway inflation in the economy. It is also engaging in quantitative tightening to ease its bloated balance sheets during the pandemic. The Fed has raised interest rates by 75 basis points three times in a row. Even the most optimistic members of the market expect a 100 basis point increase before the end of the year.
Meanwhile, recession warnings are being heard throughout the market. The World Bank estimates that the global economy will suffer a recession next year. FedEx has issued a dire warning that the slowdown in demand has accelerated. If Fed Chairman Jerome Powell follows in the footsteps of his predecessor Paul Volcker, the economy will indeed enter a recession.
How do crypto-currency traders protect themselves?
Traders have spent a record amount of money buying put options. A put option gives investors the right, but not the obligation, to sell a certain asset. It is considered negative sentiment for the value of the underlying asset. Traders also invested a record $46 billion in short index futures.
However, not everyone shares their sentiment. Michael van de Poppe, a leading crypto analyst and the CEO of Eight Global, thinks a short squeeze is coming. A short squeeze is a scenario in which a stock sold short rises and forces short sellers to sell their position at a loss. Poppe believes a crypto rally is imminent.