Bitcoin Briefly Drops to $94K as CPI Data Exceeds Expectations

• Bitcoin briefly dipped to $94K after CPI data exceeded expectations.
• Powell’s favorable speech helped major cryptos recover to weekly highs.
• Options market indicates lower volatility ahead with declining term skew.

Bitcoin saw a sharp drop to $94,000 after the latest Consumer Price Index (CPI) data slightly exceeded market expectations. The higher-than-expected inflation figures initially spooked investors, leading to a quick sell-off in BTC and other major cryptocurrencies. However, the market quickly rebounded, with Bitcoin and other major assets regaining their weekly highs.

One of the key drivers behind this recovery was Federal Reserve Chairman Jerome Powell’s speech, which presented a favorable stance on crypto regulations. His remarks helped restore investor confidence, contributing to the quick reversal in price trends. Additionally, other macroeconomic factors played a role in stabilizing the market after the initial dip.

Options Market Signals Lower Volatility Ahead

Despite the short-term turbulence, the crypto options market is signaling a period of lower volatility ahead. Major term implied volatilities (IVs) are at their lowest levels in nearly a year, with the Deribit Volatility Index (Dvol) being below its current level only 14% of the time in the past year. The short-term implied volatility is particularly low, with the current month’s expiry IV at just 46%.

This suggests that traders and investors expect reduced price swings in the coming weeks. The weakening of bullish forces in the near term, combined with large-scale whale selling of Block calls, has contributed to this trend. Since the end of last month’s delivery cycle, the term skew has been on a continuous downward trend and is now oscillating around the zero axis.

Whale Activity and Market Sentiment

Large-scale investors, often referred to as ‘whales,’ have been actively selling options, further influencing the market sentiment. As the market digests the impact of the so-called ‘Trump Trade’ and other macroeconomic factors, whale activity suggests that selling options remains a preferred strategy for major players.

With a combination of macroeconomic influences, regulatory comments, and whale trading patterns, Bitcoin and other cryptocurrencies remain in a phase of adjustment. While the market has shown resilience following the CPI data shock, lower implied volatility indicates that traders may be preparing for a period of relative stability in the near term.