Bitcoin Options Turn Cautious As BTC Longs Increase Size

Key takeaways:

• The Bitcoin options delta skew rose above the 7% neutral threshold, signaling cautious trader sentiment ahead of the US Fed decision.

• The top traders’ long-to-short ratio and $292 million spot ETF inflows support optimism despite mixed BTC derivatives.

Bitcoin (BTC) approached the $117,000 level on Wednesday but failed to maintain its bullish momentum, as traders weighed the possibility that a Federal Reserve interest rate cut is already priced in. Market sentiment was further dampened by speculation about additional restrictions on artificial intelligence microchip sales to China.

Are Bitcoin traders merely hedging ahead of the US Federal Reserve decision, or are they placing bearish bets targeting $110,000 amid heightened uncertainty in AI-related demand after Nvidia (NVDA) shares traded down 2.6% on Wednesday?

The Bitcoin options delta skew rose above the 7% neutral threshold on Wednesday, indicating put (sell) options are trading at a premium compared with call (buy) options. While not extreme, this shift is typically seen in bearish markets, contrasting with the neutral 5% level observed earlier in the week.

The Financial Times reported Wednesday that China’s internet regulator is banning companies from purchasing certain Nvidia microchips. According to AP, Nvidia’s CEO Jensen Huang said in response: “I’m disappointed with what I see, but they have larger agendas to work out, you know, between China and the United States, and I’m understanding of that, and we’re patient about it.”

Bitcoin traders brace for Fed rate decision

To determine whether the higher Bitcoin options skew coincided with increased trading activity, one should closely examine the premiums effectively paid by market participants. Periods of panic are typically marked by a sharp surge in the put-to-call premium, as traders aggressively seek strategies to hedge their positions.

The BTC options put-to-call ratio at Deribit currently stands at 71%, reflecting low appetite for neutral-to-bearish positioning among traders. Levels above 180% indicate extreme fear, last observed on April 8 when Bitcoin’s price plunged below $75,000 for the first time in five months.

These data contradict the notion of a doomsday scenario or excessive caution amid artificial intelligence sector uncertainty and escalating global trade tensions. Overall, Bitcoin traders’ sentiment appears to primarily reflect anticipation of US Fed Chair Jerome Powell’s remarks following the interest rate decision announcement, rather than panic or overreaction in the market.

Related: Bitcoin whale awakens after 12 years, transfers 1,000 BTC before US Fed meeting

Top traders bullish as spot ETFs inflows support Bitcoin optimism

The exchanges’ top traders’ long-to-short ratio provides a broader gauge of market sentiment, as it includes futures, margin, and spot markets.

Top traders’ long (bullish) positions at Binance and OKX rose on Wednesday compared with the previous day, signaling optimism for Bitcoin despite mixed signals from BTC options markets. In effect, whales and market makers anticipated price gains but were caught off guard when Bitcoin slipped to $115,540.

The $292 million net inflows into Bitcoin spot exchange-traded funds (ETFs) on Tuesday likely supported trader optimism, reinforcing expectations of $120,000 and higher. However, the ultimate outcome will depend on the probability of a less restrictive US monetary policy and potential further de-escalation in the US-China import tariffs debate.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.