Bitcoin is in a narrow range as attention is focused on the US Federal Reserve's statement on monetary policy on Wednesday, which could provide clues about the central bank's course of action and cause volatility in financial markets.

 

The cryptocurrency is trading in a narrow range of $39,400 to $41,300 from Monday's European trading hours, data from CoinDesk 20 show.

 

"The market is completely neutral ahead of the Fed meeting with small spot purchases," said Brian Tehako, IT director at Warwick Capital Management. "Traders are waiting for the Fed's announcement."

 

According to singaporean company zCP Capital, this event is likely to cause a reaction of the binary market. Binary events are dramatic events that cause large movements in any direction.

 

"If the Fed remains "pigeon" (continued the bias towards stimulus), cryptocurrencies will have the greatest growth potential, at least until September, given the oversold that we have seen compared to other macro markets since the publication of the consumer price index in May," the company said in a Telegram channel.

 

Bitcoin dropped from $58,000 to nearly $30,000 in the eight days to May 19. The sell-off comes after official data released on May 12 showed the U.S. consumer price index rose to its highest level in nearly three years. This renewed fears about the Fed's premature winding down - the gradual winding down of incentives to increase liquidity.

 

However, while bitcoin fell due to fears of Fed tightening, traditional markets remained resilient, while gold rose by 7.8% in May. Shares also remained in value.

 

As a result, bitcoin and cryptocurrencies in general look relatively cheap before the Fed meeting, which can bring them the greatest benefit in the case of a "pigeon" decision.

 

On the other hand, the "hawkish" surprise can negatively affect the prices of assets. If they are "hawkish" on Wednesday, all bets will be made, and we expect that the market will return to recent lows," - said in the "CCP Capital.

 

According to Patrick Heusser, head of trading at Crypto Broker AG, "painful" trading can be a reaction to risk reduction, leading to the growth of safe currencies such as the franc, yen and US dollar, and the sale of commodities and stocks. "Reducing risk can also bring losses to bitcoin," Heusser said.

 

The cryptocurrency market seems to have tuned in to a surge in volatility after the Fed meeting." "The cryptocurrency market looks like a long range before this event," Denis Vinokurov, head of research at Synergia Capital, told CoinDesk.

 

Gamma refers to the rate of change in the option delta - the sensitivity of the option price to changes in the price of the underlying asset. That is, the gamma measures the rate at which the price of the option changes in the spot market changes.

 

Being a long range means holding an optional position with a net range of more than zero. Simply put, the position will benefit from increased volatility in the price of the underlying asset.