Subtle Interest in Bitcoin (BTC) Protection Seen Before Powell’s Remarks on Potential June Rate Reduction

Bitcoin (BTC) options market activity reflects a degree of risk aversion as investors prepare for forthcoming comments from Federal Reserve Chair Jerome Powell regarding a possible interest rate cut in June.

Despite expectations for the Fed to maintain current rate levels during this week’s meeting, there has been only a slight uptick in demand for protective BTC puts, indicating a measured caution among experienced traders, according to Deribit’s CEO, Luuk Strijers.

A put option allows the buyer the right, but not the obligation, to sell an asset at a set price before a specified deadline. This mechanism acts as a safeguard against falling prices. Traders often utilize put options to either capitalize on declines or to shield long positions from downswings.

As the leading crypto options exchange, Deribit sees billions in trading volume daily. Each contract on the platform corresponds to one BTC.

Strijers noted that the overall options market has not demonstrated a clear directional trend or a strong inclination toward downside protection.

“The current spot price of BTC is around $94K, with Deribit’s DVOL, our implied volatility measure, situated at 45. These figures are reminiscent of conditions from June 2024. This implies a moderate risk-off atmosphere, but there’s no sense of widespread panic,” he stated.

### DEX traders ramping up put purchases

In contrast, traders on the decentralized exchange Derive.XYZ appear notably more anxious about potential downturns.

“There are signs of protective strategies emerging, as traders are acquiring puts with strike prices of $82K, $78K, and $76K, seemingly due to worries about the Fed’s meeting possibly leading to no rate cuts, or even increases,” remarked Dr. Sean Dawson, head of Research at the decentralized AI-powered options platform.

Derive, previously known as Lyra, is a prominent on-chain options platform, claiming more than 20% of total on-chain trading, which amounted to $1.38 billion in April.

The Fed is anticipated to keep the key interest rate stabilized between 4.25% and 4.50%, a widely held belief. Simultaneously, Powell is expected to uphold a data-driven approach during the subsequent press interaction post-meeting.

### Heightened focus on June rate cut discussions

Nonetheless, Powell may be questioned about the likelihood of a June rate cut, along with the economic implications stemming from the recent trade tensions involving President Donald Trump and China.

The unease among DEX traders likely relates to how Powell addresses these critical matters.

Prior to last Friday’s unexpected rise in nonfarm payrolls, market speculation favored a quarter-point rate reduction in June. However, the robust employment report has altered expectations, with the market now projecting only a 30% chance of a cut.

“Investors will closely observe next week’s FOMC gathering for stronger indications of a possible return to rate cuts in the subsequent June meeting. Following April’s solid nonfarm payroll results, a June cut now appears less probable and hinges on forthcoming economic data trends,” noted Lee Hardman, a senior currency analyst.

If Powell dismisses the idea of a June cut while expressing concerns about stagflation, it could adversely affect risk assets like BTC. A similar negative response would arise if policy uncertainty is reflected in an updated policy statement acknowledging trade war developments.

Bank of America predicts that Powell will likely leave options open for a June rate cut.

“Powell will likely be inquired about the potential for a June rate cut. The threshold for such a cut appears high, especially with the 90-day halt on reciprocal tariffs extending to July. Nonetheless, we believe Powell wouldn’t want to completely dismiss the possibility of a June cut,” stated BofA’s global research team.

“Stating that the Fed remains data-focused and attentive to risk factors related to its dual mandates seems straightforward; ultimately, the data will determine the course of action.”