After the Federal Reserve’s hawkish remarks, short-term Bitcoin puts have seen a significant surge, indicating a shift in market sentiment and increased caution among traders.

Crypto traders had anticipated a potential dovish approach from the Fed, but their concerns were confirmed on Wednesday when Chairman Jerome Powell announced a 25 basis point rate cut. While the cut was in line with expectations, Powell expressed uncertainty about future rate reductions, causing unease in the market. This cautionary tone from the Fed has dampened bullish sentiment, particularly in risk assets like Bitcoin.

According to Amberdata, the seven-day call-put skew for Bitcoin has reached its highest implied volatility premium for put options since September. Put options, which provide downside protection, have become more expensive relative to call options. This indicates that traders are actively hedging their positions against further declines in Bitcoin’s price.

The market’s fear is further reflected in the one-month skew, showing a marked preference for puts over calls. For options with expirations ranging from two to six months, call options are now trading at a smaller premium to puts, signaling reduced optimism for a market rebound in the near term.

The Fed’s decision to lower the benchmark interest rate by 25 basis points to 4.25%-4.5% aligns with its ongoing easing cycle, having cut rates by 100 basis points since September. Despite this, Bitcoin’s price dropped following Powell’s remarks, as he suggested that future rate cuts may not be as aggressive, with the Fed approaching a neutral level. Powell also dismissed the possibility of the central bank participating in a strategic Bitcoin reserve, in response to President-elect Trump’s proposal to accumulate Bitcoin similar to the country’s oil reserves.

The Fed’s updated dot plot, which outlines rate projections, showed a reduction in anticipated rate cuts for 2025, with only two cuts expected, down from the three previously projected. This more hawkish outlook caused risk assets to drop, with the Dow Jones losing over 1,000 points, or 2.5%, and Bitcoin sliding from $105,000 to under $99,000, according to data from TradingView and CoinDesk.

Currently, Bitcoin is recovering slightly, trading around $101,200 after the overnight losses.

The dollar also continues to strengthen, with the dollar index holding near 108, its highest level since October 2022. A stronger dollar puts additional pressure on risk assets like Bitcoin, potentially limiting any short-term gains.