Bitcoin’s resistance to retesting $25K support may be futile.

Bitcoin has been trading within a narrow 3.4% range for the past three days, after successfully defending the $25,500 support on June 10. During this time, investors have shifted their attention to the macroeconomic area, as the United States Federal Reserve is set to announce its interest rate decision on June 14.

Although cryptocurrencies work independently from traditional finance markets, the cost of capital affects almost every investor. In May, the Fed raised its benchmark interest rate to 5-5.25%, the highest it has been since 2007.

All eyes will be on Fed Chair Jerome Powell’s media speech, which will take place 30 minutes after the rate announcement. Markets are currently pricing in a 94% chance of a pause at the June meeting, based on the CME FedWatch tool.

Crypto fears extend beyond the FOMC meeting

The upcoming Federal Open Market Committee meeting is not the only concern for the economy, as the U.S. Treasury is set to issue more than $850 billion in new bills between now and September.

• SEC and Binance in talks over US assets freeze.
• Circulating supply of 196M BLUR has increased by 40% through a blur-to-unlock process.
• Bernstein analysts warn that political involvement in regulating cryptocurrency could discourage the decentralization of blockchain technology in the future.

Additional government debt issuance tends to cause higher yields and, thus, higher borrowing costs for companies and families. Considering the already-restrained credit market due to the recent banking crisis, it is likely that gross domestic product growth will be severely compromised in the coming months.

According to on-chain analytics firm Glassnode, miners have been selling Bitcoin (BTC) since the beginning of June, potentially adding further pressure to the price. Among the potential triggers are reduced earnings from a cooldown in Ordinals activity and the mining hash rate reaching an all-time high.

Investors are now questioning whether Bitcoin will test the $25,000 resistance, a level unseen since mid-March. For this reason, they are closely monitoring Bitcoin futures contract premiums and the costs of hedging using BTC options.

Bitcoin derivatives show modest improvement

Bitcoin quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, BTC futures contracts in healthy markets should trade at a 5-10% annualized premium — a situation known as contango, which is not unique to crypto markets.

The demand for leveraged BTC longs has slightly increased, as the futures contract premium increased to 3% from 1.7% on June 10, although it is still far from the neutral 5% threshold.

Traders should also analyze options markets to understand whether the recent correction has caused investors to become more optimistic. The 25% delta skew is a telling sign of when arbitrage desks and market makers overcharge for upside or downside protection.

In short, if traders anticipate a Bitcoin price drop, the skew metric will rise above 7%, and phases of excitement tend to have a negative 7% skew.

Related: ​​ Crypto fund outflows reach $417M over 8 weeks as investor caution persists

The 25% delta skew metric entered “fear” mode on June 10 as Bitcoin’s price faced a 4.5% correction. Currently at 4%, the indicator displays balanced pricing between protective puts and neutral-to-bullish call options.

The crypto bear trend looks set to continue

Normally, a 3% futures basis and a 6% delta skew would be considered bearish indicators. However, this is not the case given the extreme amount of uncertainty regarding the economic conditions and the recent charges against Binance and Coinbase. The Securities and Exchange Commission (SEC) alleges that those exchanges held unregistered offerings and sales of tokens and failed to register as brokers.

U.S. lawmakers have criticized the SEC for its heavy-handed approach to crypto enforcement. On June 12, Rep. Warren Davidson proposed a bill aimed at restructuring the SEC by firing Chair Gary Gensler and redistributing power between the commissioners.

The uncertain crypto regulatory environment remains a hurdle to attracting institutional investors. Furthermore, the recession risk for the U.S. economy limits the demand for risk-on assets such as Bitcoin, increasing the odds of the $25,000 support being tested.

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