Bitcoin Options Traders Reduce Hedges Ahead of Fed Meeting

Bitcoin options traders are significantly reducing their downside hedging positions ahead of the upcoming Federal Reserve (Fed) meeting. According to Glassnode data, the Bitcoin put/call open interest ratio has fallen sharply from 0.76 at the end of June to approximately 0.52 as of July 24, 2026, indicating a shift from a defensive stance to a more bullish market sentiment. This unwinding of protective bets comes as Bitcoin's price has stabilized near the $67,000 level.

This market development is particularly evident in short-dated options contracts. At-the-money (ATM) implied volatility for one-week maturities stands at 34.3%, while six-month maturities show a higher 40.8%. This upward-sloping term structure suggests that the market may be underestimating short-term event risks, such as the Fed meeting, and anticipates a calmer immediate future compared to the distant one. Furthermore, the short-term 25-delta skew, which measures the premium paid for downside protection, has sharply declined to around 4%, reflecting weakened demand for near-term put hedges. However, the medium-to-long-term skew remains elevated at 11-12%, indicating that institutional players continue to maintain a cautious outlook for extended downside risks.

The shift in the options market is influencing Bitcoin's price dynamics. The reduction in bearish hedging positions could alleviate selling pressure on Bitcoin and bolster upward expectations. Indeed, large traders have been observed accumulating $70,000 strike call options and bull call spreads, signaling expectations of upside potential in the spot price. While this supports a bullish outlook, it also introduces a risk that the market could be vulnerable to unexpected hawkish decisions from the Fed. Bitcoin's consolidation around the $65,000 mark reflects the prevailing uncertainty ahead of these macroeconomic events.

The broader economic context of this development is closely tied to the upcoming interest rate decision by the U.S. Federal Reserve and ongoing global inflation concerns. The Federal Open Market Committee (FOMC) is scheduled to meet on July 28-29, with the rate decision expected on Wednesday. Futures markets are currently pricing in approximately a 36% chance of a 25-basis-point rate hike by the Fed, a notable increase from just 16% a week prior. This rapid repricing of expectations has been largely driven by last week's surge in crude oil prices above $100 per barrel, reigniting inflation fears. Concurrently, an easing of geopolitical tensions between the U.S. and Iran, leading to a drop in oil prices, has provided some relief to risk assets.

Analysts and market participants are keenly focused on the potential impact of the Fed's announcements. While the majority anticipates the Fed will maintain interest rates in the 3.50%-3.75% range, the rising probability of a rate hike presents a significant consideration for risk assets. The current thin positioning in the options market suggests that any surprising hawkish rhetoric or projections from the Fed could amplify price movements rather than absorb them. Although a put/call ratio of 0.52 is generally interpreted as bullish territory, a further decline towards 0.4 or below while Bitcoin remains range-bound near $67,000 could signal excessive optimism. Conversely, a hawkish surprise from the Fed could potentially push Bitcoin towards $61,000 or lower.