Market data shows that %Bitcoin (CRYPTO: $BTC) traders have turned defensive after the U.S. Federal Reserve delivered a 25-basis point interest rate cut.
Traders are hedging their exposure to Bitcoin days after the U.S. central bank lowered interest rates for the first time this year, according to crypto derivatives exchange Deribit.
Over the past two days, traders have bought a growing number of put options, which provide insurance against price declines. Put options are now trading at a premium, says Deribit.
Analysts say that concerns are rising that risk assets such as stocks and cryptocurrencies might be nearing a top after the interest rate reduction, leading traders to hedge their bets.
Stocks in the U.S. hit new all-time highs in the day after the Fed’s rate cut and crypto prices moved higher, with BTC trading above $116,000 U.S.
However, with signs of froth entering the market, many traders are now moving to protect themselves with a growing number of put options.
Covered calls are also being written by crypto traders. This is the practice of selling call options against spot holdings to collect premiums.
The strategy generates additional income for traders while providing some downside protection. It’s a popular strategy among crypto traders.
Bitcoin’s price has risen more than 20% so far in 2025.
