Options Traders Roll Back Downside Hedges Ahead of Fed Meeting

Bitcoin options traders have significantly reduced their downside hedges as they prepare for this week's Federal Reserve meeting. The put/call open-interest ratio has fallen to about 0.52 from 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, signaling expectations of upside in the spot price. 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.

Implied volatility is subdued across the curve, with a slope upward into the future. This suggests that markets see this week as calmer even as they insure against turbulence later in the year. The Federal Reserve's rate decision lands on Wednesday, and markets have put the odds of a July increase at roughly 15%, leaving little cushion if the statement or projections surprise.