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CORRECTION (May 29, 22:00 UTC): Corrects amount of bitcoin purchased.UPDATE (May 30, 00:06 UTC): Adds company spokesman declining comment.

CORRECTION (May 29, 22:00 UTC): Corrects amount of bitcoin purchased.

CORRECTION (May 29, 22:00 UTC): Corrects amount of bitcoin purchased.

IndyCar Series team Ed Carpenter Racing’s (ECR) No. 21 Bitcoin Chevrolet will line up at the starting line along with 32 other cars at the iconic Indianapolis Motor Speedway, also called the Brickyard, so named for the pavers that lined the course in its early years. The black-and-orange car bearing Bitcoin logos is the first racing car sponsored by members of the bitcoin (BTC, +5.73%) community.

“To bring my personal interest and immersion in Bitcoin to our industry is historic,” team owner Carpenter said earlier this month in a press release announcing the arrangement. “…I see it as an opportunity to transform how we operate within our own motorsport industry.”

ECR’s bitcoin sponsorship is among the latest examples of cryptocurrency mixing with professional sports. In March, Major League Baseball’s Oakland A’s announced that they would accept bitcoin as payment for season suites. Last month, the NBA Sacramento Kings’ Chairman and CEO Vivek Ranadivé said in a Clubhouse gathering that he would give his players and staff a bitcoin payment option.

Dutch driver and 2020 NTT IndyCar Series Rookie of the Year Rinus VeeKay will drive the black-and-orange car bearing Bitcoin logos, which will also adorn his fire suit and the uniforms worn by the team’s pit crew.

Carpenter told AutoWeek in a May 13 story that he owns bitcoin and saw it as an innovative way to compete against other racing teams — and sports — for coveted sponsorship money.

“We’re a sponsorship-driven industry and it’s getting harder to compete in the space with other race teams, with other marketers, with other sports properties,” he told AutoWeek. “I’ve been getting involved with this, and I see a lot of opportunity to change the way we do business.”

ECR has partnered with the Strike payment app to enable payments and donations this month. A unique QR code has allowed anyone in the world to donate — what ECR described in its press release as “the world’s first peer-to-car contribution model.”

The racing team is also the first in Indy racing to offer its employees the option of accepting bitcoin as a payment option.

Carpenter said that he chose 21 to denote the 21 million bitcoin that Satoshi Nakamoto created in launching his digital currency.

VeeKay will start in the first row in Sunday’s race after averaging over 231 mph in qualifying runs last week.

“With the power of the Bitcoin community backing ECR…our team is more than ready to attack the Indy 500 and capture our first Borg Warner Trophy (which goes to the Indy winner),” Carpenter said in a May press release. “We want to kiss the bricks, drink the milk, then watch Bitcoin race past $100k!”

Bitcoin, the world’s largest cryptocurrency by market capitalization, was down Friday by 7.6% as of press time. BTC was below the 10-hour moving average and the 50-hour, a bearish signal for market technicians. 

The price of BTC fell from $39,053 at 22:30 UTC (6:30 p.m. ET) Thursday to as low as $35,453 by 12:00 UTC (8:00 a.m. ET) Friday, a 9.2% slip based on CoinDesk 20 data.

Fundamental crypto market bearishness, including uncertainty about bitcoin as an inflation hedge after U.S. President Joe Biden’s administration released a $6 trillion budget plan as well as continuing concerns about bitcoin mining causing damage to the environment likely led to selling Friday. 

“It could be a difficult weekend for crypto investors,” said David Russell, vice president of market intelligence at brokerage TradeStation Group. “The mid-May sell-off left some technical scars that may need time to heal. Bitcoin is under $40,000 and dragging on the space.”

On May 23, bitcoin fell to a one-month low of $33,140, according to CoinDesk 20 data.

In the bitcoin derivatives market, the top positioning on bellwether options venue Deribit is at a looks-pretty-far-from-here $100,000 strike price. Over 8,000 calls with a notional value of $305 million are at that six-digit strike, according to Deribit data. 

“You can see there’s even a $400,000 strike, which is ridiculous,” said Nathan Cox, chief investment officer of crypto fund Two Prime. 

Diving deeper, data aggregator Genesis Volatility provides implied volatility metrics based on Deribit data of expirations.  On the June 11 expiration, for example, the skew is bearish, seen by a large amount of implied volatility oriented at the $20,000 strike price. 

However, when looking deep into the future, implied volatility skews mega-bullish at a $400,000 strike for the March 23, 2022 expiration. 

It’s a short-term bearish outlook but long-term hyper bull mode for options traders, according to Cox. And he believes there may be more downside ahead before a reversal. 

“So it’s like, yes, we all believe in the macro case for bitcoin,” Cox told CoinDesk. “But the question is, how do you trade it right now? And the answer is maybe a little bit more nuanced than what most think, which is, strap in because we’re not done yet.”

The second-largest cryptocurrency by market capitalization, ether, was trading around $2,506 as of 21:00 UTC (4:00 p.m. ET), slipping 9.3% over the prior 24 hours. The asset is below the 10-hour moving average but above the 50-hour, a sideways signal for market technicians. 

Ether dipped from $2,784 at 22:00 UTC (6:00 p.m. ET) Thursday to $2,443 by 12:00 UTC (8:00 a.m. ET) Friday, an 8.2% dump based on CoinDesk 20 data. ETH has since gone up and down but settled higher, $2,506 as of press time.  

Spot ether volumes were higher than bitcoin for the third straight day on Thursday, based on the last available data from CoinDesk Research. BTC’s $40 million tally Thursday was 8% lower than ether’s $44 million in trading volume, a sign traders are continuing to find highly liquid crypto opportunities outside of bitcoin. 

While this development might concern some long-term bitcoin holders, Nick Mancini, a research analyst for signals firm Trade the Chain, pointed out that BTC dominance, or its share of the overall cryptocurrency ecosystem, is steady – it’s actually up by 0.30% as of press time Friday.

“If bitcoin dominance continues to rise we expect BTC to lead the way for ETH and other large-caps,” Mancini said. “And we expect both ETH and BTC sentiment and price action to stay correlated through the weekend.”

Over 230,000 BTC as of press time is “wrapped” on Ethereum, a record high. Wrapped bitcoin is held in escrow in a custody wallet, and tokens are created on the Ethereum network to represent that value and deployed across various decentralized finance, or DeFi, applications like lending, trading and derivatives. 

At over 184,000 bitcoin, the most popular wrapped project is wBTC. It’s a joint effort of BitGo, Kyber Network and Republic protocol, according to the white paper. 

Brian Mosoff, chief executive officer of Ether Capital, says wrapped bitcoin is hitting records because of BTC’s continuing digital gold and treasury narratives, and that this particular technology could become of interest to financial incumbents over time. 

“These are brand-new systems and pieces of software,” said Mosoff. “Watching a global community address these issues in a decentralized way, making the tooling more robust, will lead to prime time when traditional finance is ready to plug in their infrastructure and bridge the two worlds.”

Digital assets on the CoinDesk 20 are all lower Friday. Notable losers as of 21:00 UTC (4:00 p.m. ET):

Equities:

Commodities:

Treasurys:

On Friday, President Joe Biden is set to release his first full budget, seeking $6 trillion in federal spending for the fiscal year 2022 and $8.2 trillion by 2021, The New York Times reports.

The proposal shows the Biden administration remains undeterred by recent inflation fears and is unlikely to close the liquidity tap anytime soon, having already pumped trillions of dollars into the system to counter the economic effects of the coronavirus pandemic since March 2020.

That’s potentially a bullish development for bitcoin, which is widely touted as digital gold. However, the leading cryptocurrency is changing hands near $35,800 at press time, representing a 7% drop on the day. The decline comes a day after buyers failed to establish a foothold above the $40,000 mark.

However, the prospect of more liquidity is pushing stocks higher. The pan-European Stoxx 600 index is trading 0.43% higher at new record highs above 445 points, according to Investing.com. Futures tied to the S&P 500 are also hinting at a positive start to trading on Friday with a 0.5% gain.

Bitcoin’s adverse reaction to talk of more stimulus appears confounding, given it rallied from $5,000 to over $60,000 in the past 12 months, alongside a steady rise in the U.S. 10-year breakeven rate, the bond market’s forecast of long-term price pressures.

The cryptocurrency has received validation as an inflation hedge from Wall Street bigwigs and several listed companies. “Personally, I’d rather have bitcoin than a bond,” in an inflationary scenario, Bridgewater Associates founder Ray Dalio said during an hour-long conversation with CoinDesk Chief Content Officer Michael J. Casey earlier this week during Consensus 2021.

Increasing concerns about the environmental impact of cryptocurrency mining and China’s recent regulatory announcements could be keeping buyers at bay.

“Retail appears to be slowing down while regulatory concerns and ESG FUD [fear, uncertainty and doubt] from China has taken center stage,” Matthew Dibb, co-founder, and COO of Stack Funds, said. “Many market participants are covering positions in light of anticipated news that (might) come to light.” ESG stands for “environmental, social and corporate governance,” a term used to refer to companies’ sustainability and impact on society.

Bitcoin fell sharply from $58,000 to nearly $30,000 earlier this month after Tesla suspended vehicle purchases with bitcoin, citing environmental concerns.

“Environmental concerns will get bigger with time. This will represent a major long-term headwind for bitcoin, and help push dominance down,” trader and analyst Alex Kruger tweeted.

Also read: Ark’s Cathie Wood Blames Crypto Crash on ‘ESG Movement’ 

Additionally, fears that the Federal Reserve may raise the interest rate to counter inflation could be keeping the cryptocurrency under pressure. That’s because rate hikes dilute the appeal of the store-of-value assets like bitcoin.

According to Bloomberg, rates traders have boosted bets that the Fed will raise borrowing costs next year, much earlier than policymakers have indicated.

“The Fed’s broad support of the economy since the onset of the pandemic has provided support for higher asset prices including stocks and cryptocurrencies,” Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business, told CoinDesk in an email earlier this month. “Ultimately, the removal of this support is likely to provide new headwinds for asset price growth.”

The rate hike fears may amplify, if the core personal consumption expenditure (core PCE) – the Fed’s preferred measure of inflation – blows past expectations. That could lead to a deeper drop in bitcoin. The April data is scheduled for release at 12:30 UTC (8:30 a.m. ET) today.

However, analysts expect the cryptocurrency to see range play in the short term. “From a technical point of view, BTC is in a consolidation phase. We expect that there will be choppy trade between $30,000–40,000 for the next two weeks,” Dibb said.

The May expiry, expected early Friday, would have been much bigger had it not been for bitcoin’s recent drop from $58,000 to $30,000, which pricked the speculative bubble in the market.

Major exchanges are due to settle 55,900 contracts worth $2.2 billion on Friday, based on data from the provider Skew. That makes the upcoming May expiry the smallest of 2021 in terms of nominal value.

Almost all the options contracts will expire at 8:00 coordinated universal time (4 a.m. ET) – the designated time on Deribit, which is the dominant exchange for cryptocurrency options.

Open interest across all expiries – the total value of outstanding positions – nearly halved to $6.5 billion in the two weeks to May 23 and was last seen at just over $7 billion.

Settlement of monthly option contracts has gained relevance this year, with the “max pain point” – the strike price at which the most open options contracts expire worthless – serving as an overhang in the run-up to expiration (last Friday of the month).

For example, bitcoin fell from nearly $60,000 to $50,000 in the six days leading up to the March 26 expiry, narrowing the gap between spot prices and the then-max pain point of $40,000. And the cryptocurrency bounced by $4,000 to $54,000, reaching the max pain point ahead of the April expiry.

The idea is that the max pain point acts as a magnet for spot prices while heading into expiration. That’s because option sellers, mostly institutions, sometimes try to push prices closer to the max pain point to inflict maximum loss on options buyers.

The max pain point for Friday’s expiry is $50,000 – more than 25% above the current price of $39,500. Some investors are betting that the max pain effect will kick in ahead of the settlement, pushing prices toward $50,000, as tweeted by Swiss-based options analytics platform Laevitas.

While historical data supports the case for a pre-expiry rally, the size of the impending settlement is relatively small compared to previous expirations. For example, a record $6 billion worth of contracts expired at the end of March, while exchanges settled more than $4 billion of options earlier on April 30.

Thus, the max pain effect may not have big influence on the market ahead of Friday’s settlement. However, other factors such as the renewed outflows from crypto exchanges may help the battered cryptocurrency gain some ground.

While nominal value has declined with the price drop, the number of contacts open on Deribit has remained mostly stable in the aftermath of the price crash. 

The resilience could be attributed to increased option selling in the wake of the recent spike in implied volatility. Some Asia-based family offices and ultra-high-net-worth individuals sold put options earlier this week.

Also read: Bitcoin Outflow From Exchanges Suggests Confidence Crypto Rout Is Over

Also read: Fairlead’s Stockton Plans to Add Bitcoin Exposure Only After Key Indicator Turns Higher

Also read: Fairlead’s Stockton Plans to Add Bitcoin Exposure Only After Key Indicator Turns Higher