“The Bitcoin market is gripped by its strongest fear in three months after the Fed’s hawkish remarks.”

Following the Federal Reserve’s hawkish stance, short-term Bitcoin put options have surged, signaling a shift in market sentiment and increasing concern among traders.

Crypto market participants had hoped for a more dovish approach from the Fed, but their fears were realized on Wednesday when Chairman Jerome Powell announced a 25 basis point rate cut. Although the cut was in line with expectations, Powell emphasized uncertainty about the pace and extent of future rate cuts, spooking investors and weakening risk appetite, especially for assets like Bitcoin.

Data from Amberdata reveals that the seven-day call-put skew for Bitcoin has reached its highest level of implied volatility in three months, with put options—offering downside protection—becoming notably more expensive relative to call options. This suggests that traders are scrambling to hedge against potential further declines in Bitcoin’s price following the Fed’s remarks.

The sentiment in the market is further reflected in the negative one-month skew, indicating an increasing preference for puts over calls. Options with expirations from two to six months have seen their call premiums drop to the lowest levels observed in recent weeks, suggesting growing caution for Bitcoin’s longer-term outlook.

Bitcoin’s price reacted negatively to the Fed’s rate cut and Powell’s cautionary comments, dropping from roughly $105,000 to below $99,000. Powell also commented that the Fed has no plans to establish a strategic Bitcoin reserve, in response to President-elect Trump’s suggestion that the U.S. government could hold Bitcoin as part of its national reserves, similar to its oil stockpile.

In addition, the Fed’s updated economic projections showed only two rate cuts in 2025, instead of the three previously anticipated, signaling a less dovish outlook and spurring further losses across risk assets. The Dow Jones dropped 2.5%, shedding over 1,000 points, while Bitcoin struggled to maintain its position, trading around $101,200 after initially falling below $99,000, according to TradingView and CoinDesk data.

On the broader market front, the U.S. dollar remains strong, holding steady near a 14-month high of 108 on the dollar index. The persistent strength of the greenback may pose an additional headwind for Bitcoin and other risk assets, limiting the potential for a swift recovery.