Bitcoin (BTC) punters are looking at topside options bets

Bitcoin (BTC) punters are looking at topside options bets in a bullish shift in price expectations after the Federal Reserve's (Fed) meeting

Federal Reserve’s (Fed) meeting minutes brought a bullish shift in crypto price expectations with topside options bets being favored over near-term downside, especially in Bitcoin (BTC). However, ether (ETH) derivatives showed a lagging interest.

As of writing, BTC’s short-term and long-term risk reversals, which show the implied volatility premium (demand) for bullish bets or calls versus puts, were positive, implying investor interest in chasing price gains in the leading cryptocurrency, according to data from Amberdata.

It marks a shift from the bearish sentiment that prevailed in the weeks before the Fed meeting when short and near-dated puts were pricier than calls, reflecting greater downside fears.

“Frontend skew flipped calls. Flows featured 21 Mar (March) outright calls and calendars bought, while 28 Mar puts were sold,” institution-focused over-the-counter tech platform Paradigm noted in the Telegram chat. Institutions and large traders execute block trades via OTC platforms like Paradigm, which are then listed on Deribit.

Options are derivative contracts that give the purchaser the right but not the obligation to purchase or sell the underlying asset at a predetermined price at a later date. A call option grants the right to buy, while a put option grants the right to sell.

The bullish shift in the short and near-dated options came as the Federal Reserve (Fed) retained the forecast for two rate cuts this year despite making the expected stagflationary adjustment in economic forecasts. The bank will also be slowing the pace of balance sheet run off from April.

More importantly, Chairman Jerome Powell downplayed fears about the inflationary impact of Trump’s tariffs, calling it transitory.

“The thinking is that over time, the adjustment in the level of goods prices will have implications for sticky services inflation and labor costs,” Powell said.

The sustained strength in the U.S. dollar index (DIX) post-pandemic, however, could pose an issue for cryptocurrencies, especially in the near term. A stronger greenback usually reduces demand for riskier assets like cryptocurrencies.

The matter is crucial as the Fed is expected to begin cutting interest rates only in the second half of 2024, a delay that could keep the dollar elevated for longer.

The prolonged legal tussle between the SEC and Ripple, which uses XRP for cross-border transactions, also came to an end this week, potentially aiding market sentiment. XRP, with the market cap of $142.21 billion, is the world’s fourth largest cryptocurrency.

Ether puts remain pricier

These positive developments, however, are yet to translate into a positive flip in the short and near-dated ether options.

At press time, ether risk reversals showed a bias for puts out to the May expiry, retaining the pre-Fed cautious sentiment despite the looming Ethereum Pectra upgrade.

The technological update will introduce smart accounts to ethereum, blob scaling and validator UX enhancements and seen as a game changer by many. Ethereum developers launched a new test network, Hoodi, this week to carry out the impending upgrade, expected to take effect on March 26.

“Pectra is the last major upgrade before introducing the modules to the chain and setting the stage for the next stage of scaling solutions,” Paradigm said in its weekly newsletter.

Note that the persistent bias for ether puts could be partly driven by traders looking to hedge downside risks in other altcoins. Ether is widely seen as the altcoin leader.