Crypto Traders Seek Downside Protection as Trump’s Digital Asset Reserve Disappoints

Traders are hedging against potential declines in Bitcoin (BTC), Ether (ETH), and Solana (SOL) as short-dated put options trade at a premium relative to calls, according to Block Scholes.

On Thursday, U.S. President Donald Trump signed an executive order establishing a digital asset reserve to hold BTC and seized altcoins. However, the reserve will not actively purchase new assets, dampening hopes for fresh buying pressure in the crypto market.

The lack of direct market participation has led traders to increase demand for short-term put options on BTC, ETH, and SOL, according to Deribit data tracked by Block Scholes. Despite the cautious tone, XRP has remained an outlier, showing resilience amid the broader downturn.

Traders Turn to Protective Puts

Put options allow traders to sell an asset at a predetermined price, providing protection against price drops.

Implied volatility skews, which reflect demand for downside protection, indicate that BTC, ETH, and SOL short-dated puts are trading at a premium compared to calls—a sign that traders are bracing for potential declines.

“Short-tenor skews for BTC, ETH, and SOL continue to show strong demand for puts, reflecting downside concerns. However, further-dated expiries beyond April still indicate a bullish outlook for BTC and ETH, while XRP options remain positively skewed across all durations beyond one week,” said Andrew Melville, research analyst at Block Scholes.

Melville noted that derivatives pricing reflects disappointment over Trump’s digital asset reserve, which traders had hoped would involve government purchases of BTC and other cryptocurrencies.

Meanwhile, volatility in BTC and ETH term structures has started to ease, with front-end at-the-money volatility dropping by over 10 points as uncertainty fades ahead of key macroeconomic events.

Focus Shifts to Crypto Summit and Job Data

With disappointment over the digital asset reserve lingering, traders are now turning their attention to Friday’s White House Crypto Summit, hoping for policy clarity that could impact institutional investment in digital assets.

“The summit could provide critical insights into regulatory direction, including potential tax incentives, changes in enforcement policy, and clarity on token classifications. These factors could remove roadblocks for institutional investors looking to enter the crypto space,” said Ryan Lee, chief analyst at Bitget Research.

Lee pointed to key developments to watch, including potential legislative backing for crypto initiatives, signals of regulatory leniency from SEC Commissioner Mark Uyeda, and details on the reserve’s structure. A supportive stance could trigger bullish momentum, while vague or restrictive measures may increase volatility.

Additionally, traders are closely monitoring the U.S. nonfarm payrolls (NFP) report for February, set to be released at 13:30 UTC. The report is expected to show job gains of 160K, up from 143K in January, with unemployment remaining steady at 4%. Wage growth is projected to slow slightly to 0.3% month-over-month from January’s 0.5%.

A weaker-than-expected jobs report could reinforce expectations of multiple Federal Reserve rate cuts in 2025, which may provide support for risk assets like BTC.

Uncertainty Over Fed Policy

Despite shifting market sentiment toward multiple rate cuts, some analysts caution that expectations may be premature.

“The market has now priced in three rate cuts for the year, but the Federal Reserve may take a more cautious approach given the inflationary risks posed by Trump’s tariffs. The full impact could take months to assess,” said Markus Thielen, founder of 10x Research.

Thielen also warned that under a Trump administration, the so-called “Fed put”—the point at which the central bank would intervene to stabilize markets—could be lower than under a Democratic presidency, meaning policymakers may allow for greater market volatility before stepping in.

With critical regulatory updates and macroeconomic data ahead, traders remain cautious as they navigate an uncertain market landscape.