In brief
- The U.S. conducted two recent strikes on alleged Venezuelan drug trafficking vessels, killing 14 people total and escalating tensions with President Maduro.
- Bitcoin remains relatively stable at $115,018 despite the geopolitical turmoil, though analysts warn traders to monitor resistance and support levels closely.
- Prediction markets show 90% of traders expect a 25-basis point Fed rate cut tomorrow, while volatility indexes signal growing market uncertainty.
There’s geopolitical turmoil brewing in Venezuela as investors wait to see how Bitcoin will react to tomorrow’s Federal Open Markets Committee interest rate decision.
Trouble has been brewing between the U.S. and Venezuela for a while. The U.S. has carried out two recent strikes on vessels allegedly linked to Venezuelan drug trafficking. The most recent, which was announced Monday, killed three people. The first strike, on Sept. 2, killed 11 people and sank the boat.
The U.S. has been adamant the boats are tied to “narcoterrorists” using the vessels to transport cocaine and fentanyl to the country. Venezuelan President Nicolás Maduro called the first strike a “heinous crime,” adding that President Donald Trump is trying to lure the country into a “major war.”
Bitcoin’s price hasn’t had a dramatic reaction to the news, but it has been drifting in a slack tide. At the time of writing, Bitcoin is trading for $115,018 after having gained 0.2% in the past day. It’s trading 2.7% lower than it was this time last month, according to crypto price aggregator CoinGecko.
But analysts at crypto exchange Bitunix warned traders to keep an eye on whether things escalate in Venezuela.
“Safe-haven flows into the U.S. dollar and Treasuries will compete with risk assets. Investors should monitor international responses and potential sanctions, while closely watching BTC resistance at $117,000–118,000 and supports at $114,000 and $111,000,” the analysts wrote in a note shared with Decrypt. “In case of abrupt developments, traders are advised to reduce leverage and limit single-position exposure.”
Despite the spike in global tensions, users on Myriad, a prediction market owned by Decrypt parent company DASTAN, are still certain that the FOMC will approve a rate cut tomorrow—but hope is fading that it will be a 50 basis point cut.
Ninety percent of users think the Fed will deliver a 25-basis point cut. And while the 50-basis point cut segment spiked to 30% on September 9, it has since shrunk to just 7.4% of market participants as of this writing.
The CEM FedWatch Tool, which uses interest rates futures prices to approximate trader sentiment, skews a little more pessimistic. At the time of writing, 96% of traders are expecting a 25-basis point cut tomorrow afternoon, leaving only 4% holding out for a bigger cut.
More broadly speaking, there are signs that the strike on the Venezuelan ship has given traders pause.
The VIX, or Chicago Board Options Exchange’s CBOE Volatility Index, has been steadily rising since Friday. It’s gained 1.69% in the past 5 days and is currently sitting at 15.66 at the time of writing.
The effect of the geopolitical strife is more pronounced in the MOVE Index, or the Merrill Lynch Option Volatility Estimate. It has risen 4.79% since yesterday’s close to 76.88, as of Tuesday morning—though it’s fallen 8.47% compared to five days ago.
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