Bitcoin Options Traders Unwind Downside Protection Ahead of Fed Meeting

Traders in Bitcoin's options market have been unwinding their downside protection ahead of the upcoming Federal Reserve meeting, which could signal expectations of a positive outcome. The put/call ratio on open interest has dropped to around 0.52 from about 0.76 in late June, indicating that calls are gaining share and traders are stepping back from hedging rather than adding to it.

Large traders have been accumulating $70,000 strike calls and bull call spreads, which suggests expectations of upside in the spot price. The market is pricing the next week as calmer than the next six months, with implied volatility compressed across the curve.

The 25-delta skew has fallen to around 4% at the one-week tenor while three- and six-month contracts hold at 11% to 12%, indicating that traders are still paying for insurance against something going wrong later this year but have largely stopped paying for it this week. The Fed's rate decision is scheduled for Wednesday, with markets putting the odds of a July increase at roughly 15%.