Traders Shift Focus from Fear to Faith as Fed Decision Looms

Bitcoin options markets have shown a shift in sentiment ahead of the Federal Reserve’s upcoming interest rate decision, with professional traders increasing their bullish positions. Data from Deribit indicates that Bitcoin options expiring today hold a notional value of $3.42 billion, with a put-to-call ratio of 1.31, reflecting a cautious stance toward downside risk. While this ratio suggests more demand for protection against potential short-term declines, the overall positioning among traders appears to be gradually becoming less bearish.

Ethereum options also show a similar pattern, with a put-to-call ratio of 1.03, suggesting slightly less bearish positioning compared to Bitcoin. Ethereum’s total notional value for expiring options stands at $858.2 million, with a notable drop in open interest compared to last week. Despite the reduction, both Bitcoin and Ethereum remain trading above their respective maximum pain levels—a price point where the largest number of options contracts expire worthless. Bitcoin is currently trading at $115,617, above its maximum pain price of $113,000, while Ethereum is at $4,553, surpassing its maximum pain level of $4,400.

Market volatility indicators point toward subdued expectations ahead of the Fed decision. Implied volatility has edged slightly lower, suggesting that the market is pricing in a relatively low future volatility environment. According to analysts at Greeks.live, this aligns with the consensus that a 25-basis-point rate cut has already been factored into current market conditions. The data also highlights a sharp increase in block trade activity in the past two weeks, accounting for more than half of daily trading volume. This suggests a high level of institutional interest, with buying and selling activity balanced across the month.

In parallel, Bitcoin’s broader derivatives market has seen a surge, with open interest in BTC futures contracts exceeding $37.7 billion—a record high—coinciding with the highest inflows into spot Bitcoin ETFs in recent weeks. The long-short ratio, which measures the proportion of long to short positions held by large traders, has risen above 1, indicating a bullish bias among top market participants. Analysts attribute this optimism to growing expectations of rate cuts by the U.S. and European central banks, which are expected to boost risk asset appetite.

Deribit’s data also shows that Bitcoin’s 7-day volatility skew—measuring the demand for call versus put options—has returned to near zero from a 4% bearish bias a week earlier, while the 30- and 60-day skews have also rebounded. This shift suggests that traders are beginning to reduce their focus on downside risk and are increasingly betting on potential upside, particularly in the event of a surprise 50-basis-point rate cut by the Fed. Greg Magadini, Deribit’s derivatives director, noted that such a move would act as a strong gamma signal for the market, potentially triggering a rally in Bitcoin and other risk-on assets like Ethereum and Solana.

The market is now in a holding pattern, with prices stabilizing ahead of the Fed’s decision. If the 25-basis-point rate cut is confirmed as expected, Magadini expects Bitcoin to continue its upward trajectory, while Ethereum may take longer to retest its all-time highs. As the Fed’s move nears, the focus remains on whether central bank policy will confirm or disrupt the current bullish momentum in the crypto markets.