Bitcoin options traders have spent the past month reducing protection against a price decline, pulling the put-to-call open-interest ratio to approximately 0.52 from 0.76 in late June. HSBC described Wednesday's Fed outcome as the most uncertain Fed decision in two years, according to Reuters. Large call concentrations at $70,000 and $72,000 settle on July 31.
Bitcoin options traders have cut downside protection while the Fed has made its next decision harder to predict. The put-to-call open-interest ratio has fallen to approximately 0.52 from 0.76 in late June, meaning about 52 put contracts remain open for every 100 calls.
Rate markets read the same week differently. Fed Funds futures assigned around a 35% probability to a quarter-point rate increase after the implied probability briefly reached 40% on Monday, so interest rate traders see an unusually wide range of policy outcomes while Bitcoin traders pay less for protection against an immediate decline.
Put skew eases into Wednesday's meeting
Bitcoin traded near $63,400 on Tuesday as the Fed's two-day meeting began. HSBC described Wednesday's outcome as the most uncertain Fed decision in two years and one of the least certain in more than four years, according to Reuters, and the uncertainty reflects Chair Kevin Warsh's retreat from the forward guidance that previously helped investors narrow the range of likely outcomes before officials voted.
One-week puts still trade at a premium to comparable calls, which shows investors continue to value downside protection. However, that premium, known as put skew, eased to about 9% from nearly 13% on Friday. Deribit analytics show seven-day Bitcoin skew moving closer to neutral after puts carried an 11-point volatility premium earlier in the month.
The ratio describes the composition of open interest, and it cannot show the intention behind each trade. Calls may represent outright bets on higher prices, while puts may serve as insurance, income-generating sales, or parts of larger strategies.
Large July 31 calls sit more than 10% away
Friday's expiry carries call concentrations at $70,000 and $72,000, with more than 20,000 calls at each strike, including a 20,000-by-20,000 bull call spread. Bitcoin would need to gain more than 10% from Tuesday's price to reach $70,000 before those contracts settle on July 31.
Therefore the holders of those calls need the market to move in the correct direction and travel far enough to offset the options' rapidly declining time value. A quarter-point increase would probably push short-term Treasury yields and the dollar higher, tightening financial conditions, while a hold with softer guidance would offer the easiest and most likely path towards those strikes.
Exchange reserves keep draining
On-chain flows point the other way. Bitcoin exchange reserves have fallen by 78,000 BTC over the past six months, reducing the amount of BTC available for sale, and the decline suggests investors are moving coins into long-term storage rather than preparing to sell.
The July meeting includes no new Summary of Economic Projections, so investors will receive no updated dot plot, which puts greater weight on the policy statement, the vote count, and Warsh's answers during his press conference. Rising put premiums after that would show investors rebuilding the protection they have just dropped.
Sources: CryptoSlate, Coinpedia Fintech News (snippet-based)
Trading involves risk.
Risk Disclaimer
