Bitcoin Traders Adopt a More Conservative Approach as Demand for Protective Options Contracts Rises

According to Decrypt, as the global financial market retraces ahead of the critical U.S. economic data release, Bitcoin traders are gradually increasing their hedging against potential downside risks, indicating a rise in market caution.

Data from the options market shows that traders are making defensive arrangements. According to Nick Forster, founder of the on-chain derivatives platform Derive.xyz, the demand for protective contracts has increased, especially for Bitcoin put options. He stated:

“Simply put, the cost traders are paying for downside protection is higher than at any other time this year, with many traders opting to purchase contracts that allow them to sell Bitcoin at prices between $75,000 and $70,000 before the end of March.”

Meanwhile, the demand for call options has weakened. Many contracts that previously profited from lower Bitcoin market prices are now set at higher price ranges, indicating that traders do not feel a strong urgency to bet on a rapid increase in Bitcoin prices.

Yesterday’s Asian early session showed some conflicting trading signals, as trading firm QCP Capital noted in their market report that the demand for long-term call options (options that profit from price rebounds) unexpectedly increased, which may suggest that traders are positioning for a quick rebound from the $75,000 support level, a price level that was seen before the U.S. elections.

Investors are closely watching the U.S. Consumer Price Index (CPI) report set to be released on Wednesday. According to MarketWatch, economists expect the CPI to rise by 0.3% in February, which would bring the year-on-year CPI growth rate down to 2.9%. Should this result occur, it may provide some breathing room for risk assets, including cryptocurrencies and stocks, while also instilling more confidence in the Federal Reserve regarding the timing of future rate cuts.