Bitcoin traders are increasingly hedging against a potential downturn, a sign of growing caution as broader financial markets retreat ahead of key U.S. economic data.
The options market—where investors buy contracts to bet on or protect against future price moves—shows traders are positioning defensively.
According to Nick Forster, founder of onchain derivatives platform Derive.xyz, demand for protective contracts has risen, particularly for so-called put options, which give holders the right to sell Bitcoin at a set price.
“Derivatives are positioned defensively right now, with the immediate 25-delta call/put skews hitting 2025 lows,” Forster said.
In simpler terms, traders are paying more for downside protection than they have at any point this year, with many focusing on contracts that would allow them to sell Bitcoin in the $75,000 to $70,000 range through the end of March.
At the same time, demand for call options, which give the right to buy at a fixed price, has weakened.
Many contracts that were previously profitable at Bitcoin’s market price are now positioned at higher levels, meaning traders see less urgency in betting on a quick run-up.
“This is creating muted volatilities across the board, with little excitement up to the $100,000 range,” Forster said. “The current market feels uncertain, and traders are preparing for potential volatility in either direction.”
Early trading in Asia revealed some contradictory signals have emerged, according to QCP Capital, with demand for longer-dated topside calls—options that profit from a price rebound—building.
“This potentially signals positioning for a swift rebound from the $75,000 support level seen pre-election,” QCP wrote in a note on Tuesday.
Indeed, the price of the world’s largest crypto has jumped 3.8% to 82,375 over the last 24 hours and has clawed back earlier losses near $77,000.
In any case, the defensive tone in Bitcoin trading mirrors broader market sentiment.
On Monday, the S&P 500 fell 0.76%, and the Dow Jones Industrial Average lost 1.14%, as investors braced for the upcoming Consumer Price Index (CPI) report scheduled for release on Wednesday.
Economists anticipate a 0.3% increase in headline inflation for February, which would bring the annual CPI rate down to 2.9%, according to MarketWatch.
That could offer some relief to risk assets, including crypto and stocks, while giving the Federal Reserve more confidence to consider the timing of its next rate-cutting cycle, Decrypt was told.
In Europe, the STOXX 600 index dropped 1.43%, while oil prices edged higher, with Brent crude settling at $69.97 per barrel.