Bitcoin Traders Increase Put Options Amid Low Volatility and Fed Rate Cut

Bitcoin traders are hedging against possible downside volatility despite recent positive market signals such as a Federal Reserve rate cut and new SEC rules for crypto ETFs. Deribit CEO Luuk Strijers noted that the demand for put options, which protect against price declines, is high, reflecting cautious sentiment among investors.

The Federal Reserve reduced interest rates by 25 basis points and may decrease them by another 50 basis points by year-end.
The SEC introduced a generic listing standard for crypto ETFs, potentially speeding up their approval process.
Deribit's DVOL index, indicating 30-day implied volatility, remains low at 24%, the lowest in two years, usually suggesting bullish sentiment.
However, on Deribit, put options trade at a premium over call options, signaling pessimism about BTC's price direction.

The options skew across different time frames remains flat to negative, suggesting bearish expectations for BTC prices. Investors might be wary that the Fed's easing was already priced in, and economic uncertainties could reduce risk appetite.

Strijers mentioned that after the Fed's decision, optimism faded, with markets awaiting a new catalyst to shift current cautious positions. Sidrah Fariq of Deribit highlighted that the put bias shows market maturity and caution, comparing it to S&P index options behavior.

Additionally, covered calls, a strategy of selling call options against spot holdings, have gained popularity among traders, contributing to the put bias and limiting upside potential.