Bitcoin Options Turn Bullish for First Time in a Year Ahead of Fed Decision, CLARITY Act Vote

Bitcoin’s options market has turned bullish for the first time in a year, with attention now on this week’s Federal Reserve rate decision and a vote on the CLARITY Act.

Reuters reported on September 14 that Bitcoin options on Derive.xyz recently shifted into bullish territory for the first time in 12 months. Bitcoin climbed above $126,000 to a peak in October last year, then fell about 50% before rebounding to reclaim the $70,000 level late last month.

Bullish positioning is also building in the options market. The 25-delta skew, which compares demand for call options that bet on gains with put options used to hedge against declines, turned positive on August 20.

That means call options are trading at a premium, Sean Dawson, head of research at Derive, said, describing it as a bullish signal.

Bets on further gains into year-end are also increasing. Open interest in options expiring on December 25 is concentrated at about $710 million at the $80,000 strike and about $530 million at the $100,000 strike.

Flows into spot Bitcoin exchange-traded funds have also improved. After eight straight weeks of net outflows in May and June, Bitcoin ETFs have returned to net inflows. About $2 billion entered during the week that included August 17.

Still, the Fed’s rate decision on September 16 stands as the biggest near-term test for the rally. Markets are pricing in about an 85% chance of a rate increase at this meeting. Yields on long-term US Treasuries are also nearing 5%, adding pressure on risk assets.

Bitcoin had been in oversold territory for some time, Matthew Deep, chief operating officer at Stack Funds, said. Short-term investors, however, still see inflation and higher rates as risk factors.

There is also a view that Bitcoin could benefit if Fed Chair Kevin Warsh signals that any rate increase would be a one-off move rather than the start of a sustained tightening cycle.

Attention is also turning to a procedural Senate vote on the CLARITY Act scheduled for September 15. Because the market currently assigns low odds to the bill’s passage, any unexpected progress could trigger a rise in Bitcoin.

If the bill passes against expectations, it could become a bullish catalyst from a fundamentals standpoint, Jim Ferraioli, head of digital asset research at Charles Schwab, said.