Bitcoin Bulls Gain Confidence as Options Traders Reduce Protective Positions

Bitcoin’s options market has shifted away from defensive positioning over the past month, with traders cutting back on the downside protection they accumulated in June as the Federal Reserve’s policy meeting draws closer.

The put/call ratio based on open interest, which tracks the amount of capital allocated to put options that benefit from price declines versus call options that profit from gains, has fallen to around 0.52 from about 0.76 in late June, according to Glassnode data.

The drop in the ratio indicates that call options are gaining a larger share of market activity, showing that traders are scaling back hedges instead of preparing for further downside. Recent moves by large traders include increased purchases of $70,000 strike calls and bullish call spreads, reflecting expectations of a potential bitcoin price recovery.

Options traders are currently pricing in a relatively calm short-term outlook, viewing the upcoming week as less volatile than the broader six-month period despite the Fed’s scheduled rate decision.

The 25-delta skew, which measures the premium paid for downside protection compared with equivalent upside exposure, has declined to about 4% for one-week options. Meanwhile, longer-dated three-month and six-month contracts continue to maintain skews of roughly 11% to 12%.

The difference suggests investors remain interested in protecting against longer-term risks but have reduced their demand for immediate downside insurance.

Implied volatility, which reflects market expectations for future bitcoin price swings, has remained compressed across maturities. One-week options are pricing volatility at 34.3%, compared with 40.8% for six-month options.

The upward-sloping volatility curve indicates traders expect the near-term environment to remain more stable than the months ahead. This pattern stands out because it appears ahead of a major scheduled macroeconomic event.

The Federal Reserve is set to announce its interest-rate decision on Wednesday, with markets currently pricing in only about a 15% chance of a July rate hike. Given those expectations, the subdued near-term options pricing appears reasonable.

Still, the lack of protective positioning leaves the market more vulnerable if the Fed’s statement or economic outlook differs from expectations. When traders reduce hedges, unexpected developments can create larger price swings.

Bitcoin remained near the $65,000 level for much of the past week, showing resilience despite Thursday’s sell-off that erased $797 billion from major U.S. technology stocks. The crypto industry also faced several challenges during the period, including bankruptcy protection filings from Movement Labs and Storj, along with wind-down announcements from exchanges BitMEX and BitMart.