Bitcoin traders cautious at highs, options show hedging
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Bitcoin surpasses $107,000, gaining over 50% since the U.S. election.
Options pricing shows traders hedging downside risks rather than chasing further highs.
Deribit risk reversals indicate put demand outweighs calls, signaling near-term caution.
Fed policy outlook remains a key variable ahead of Wednesday’s decision.
Bitcoin Rally Hits New Heights, But Traders Grow Cautious
Bitcoin (BTCUSD) extended its post-U.S.-election rally on Monday, surpassing $107,000 and registering cumulative gains of 50% since early November. The surge follows President-elect Donald Trump’s pro-crypto stance, including a pledge to establish a Bitcoin strategic reserve akin to the U.S. oil reserve. Analysts now forecast BTC prices could range between $150,000 to $200,000 by the end of next year.
However, data from the Deribit options market shows a shift in sentiment, as traders adopt a more cautious stance despite the bullish spot price momentum.
Options Market Reflects Hedging Activity
25-delta risk reversals for options expiring this Friday turned negative, indicating a premium for put options over calls. Puts expiring on Dec. 27 were priced slightly higher than calls, reflecting a growing demand for downside protection. Longer-dated risk reversals, such as those for March 2025, display a call bias of less than three volatility points—substantially lower than the bullish skew seen in previous weeks when call biases exceeded four to five points. This divergence signals a shift from aggressive speculation on upside potential to hedging against corrections, suggesting traders are no longer chasing new highs with the same conviction.
Bearish Block Trades Surface
Trading activity on Deribit, tracked by Amberdata, underscores this cautious outlook. The most notable trades include:
A short position in the Dec. 27 call at the $108,000 strike, signaling reduced expectations for a breakout above this level. Long positions in put options at the $100,000 strike for Dec. 27 and Jan. 3 expiries, reflecting near-term hedging against potential downside risks. Fed Decision Looms as a Key Catalyst
The tempered enthusiasm among traders comes ahead of the Federal Reserve's monetary policy decision on Wednesday. While markets anticipate a widely expected 25-basis-point rate cut, concerns remain that the Fed could signal a slower pace of cuts or fewer rate reductions in 2025.
Such a hawkish tilt could drive U.S. bond yields higher, strengthening the U.S. dollar and diminishing the relative appeal of riskier assets like Bitcoin. Traders are likely positioning for this scenario, preparing for potential short-term corrections in BTC prices.
Conclusion
While Bitcoin’s fundamentals remain robust and long-term bullish targets persist, options market data reveals a shift toward caution in the short term. Traders are hedging against downside risks ahead of the FOMC meeting, a key event that could dictate market direction for risk assets. For now, the BTC rally appears supported, but sophisticated positioning reflects growing vigilance among investors.
Bitcoin (BTCUSD) extended its post-U.S.-election rally on Monday, surpassing $107,000 and registering cumulative gains of 50% since early November. The surge follows President-elect Donald Trump’s pro-crypto stance, including a pledge to establish a Bitcoin strategic reserve akin to the U.S. oil reserve. Analysts now forecast BTC prices could range between $150,000 to $200,000 by the end of next year.
However, data from the Deribit options market shows a shift in sentiment, as traders adopt a more cautious stance despite the bullish spot price momentum.
Options Market Reflects Hedging Activity
25-delta risk reversals for options expiring this Friday turned negative, indicating a premium for put options over calls. Puts expiring on Dec. 27 were priced slightly higher than calls, reflecting a growing demand for downside protection. Longer-dated risk reversals, such as those for March 2025, display a call bias of less than three volatility points—substantially lower than the bullish skew seen in previous weeks when call biases exceeded four to five points. This divergence signals a shift from aggressive speculation on upside potential to hedging against corrections, suggesting traders are no longer chasing new highs with the same conviction.
Bearish Block Trades Surface
Trading activity on Deribit, tracked by Amberdata, underscores this cautious outlook. The most notable trades include:
A short position in the Dec. 27 call at the $108,000 strike, signaling reduced expectations for a breakout above this level. Long positions in put options at the $100,000 strike for Dec. 27 and Jan. 3 expiries, reflecting near-term hedging against potential downside risks. Fed Decision Looms as a Key Catalyst
The tempered enthusiasm among traders comes ahead of the Federal Reserve's monetary policy decision on Wednesday. While markets anticipate a widely expected 25-basis-point rate cut, concerns remain that the Fed could signal a slower pace of cuts or fewer rate reductions in 2025.
Such a hawkish tilt could drive U.S. bond yields higher, strengthening the U.S. dollar and diminishing the relative appeal of riskier assets like Bitcoin. Traders are likely positioning for this scenario, preparing for potential short-term corrections in BTC prices.
Conclusion
While Bitcoin’s fundamentals remain robust and long-term bullish targets persist, options market data reveals a shift toward caution in the short term. Traders are hedging against downside risks ahead of the FOMC meeting, a key event that could dictate market direction for risk assets. For now, the BTC rally appears supported, but sophisticated positioning reflects growing vigilance among investors.