Connect with us

Crypto World

Bitcoin’s volatility spikes to its highest since FTX’s collapse as prices crater to nearly $60,000

Published

on

Bitcoin's volatility spikes to its highest since FTX's collapse as prices crater to nearly $60,000

Bitcoin’s Wall Street-like fear gauge has spiked to its highest level since the collapse of the FTX exchange in 2022, signaling intense market panic as prices plummeted to nearly $60,000.

Volmex’s bitcoin volatility index (BVIV), which represents the annualized expected price turbulence over four weeks, jumped to nearly 100% from 56% on Thursday.

The index serves as a crypto equivalent to Cboe’s VIX, the so-called fear/panic gauge, which indicates the 30-day implied volatility of the S&P 500 and rises during market panics as traders bid up options prices to hedge against declines in the index.

The BVIV does the same more often than not, rising during market panics as observed on Thursday.

Advertisement

“A wave of panic swept through crypto markets this week, correlated to a sharp risk-off move across various asset classes. Bitcoin’s 30-day implied volatility, as measured by the BVIV Index, surged from just over 40 to 95 in a matter of days, levels not seen since the infamous collapse of FTX at the end of 2022,” Cole Kennelly, founder and CEO of Volmex Labs, told CoinDesk in a Telegram chat.

Implied volatility is influenced by demand for options, or derivative contracts that help traders make asymmetrical gains from uptrends in the underlying asset and hedge downside risks. Call options are used to bet on the upside, while put options are typically bought as insurance against price drops.

On Thursday, traders scrambled to buy Deribit-listed options, especially puts, as bitcoin’s price tanked from $70,000 to nearly $60,000. The top five most traded options of the past 24 hours are all puts at strikes ranging from $70,000 to $20,000, according to data source Deribit Metrics. The $20,000 put represents a bet that prices will fall below that level.

“Volatility markets reacted sharply to last night’s price drop. Front-end volatility surged as dealers adjusted for gamma [near-term risks]. Short-dated vols led the surge, showing higher demand for protection, while longer-dated vols lagged, keeping the volatility curve steeply inverted,” Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets, told CoinDesk.

Advertisement

Yang’s clients rushed to buy downside protection, fearing the price crash could devastate digital asset treasuries that bought bitcoin at higher levels. These firms could now liquidate at a loss, leading to a deeper slide in bitcoin’s price.

“With significant uncertainty still ahead — particularly around the DATs and the risk of further unwind cascades, we’ve seen a lot of client demand for downside protection,” he added.

Bitcoin’s price has bounced to over $64,000 at the time of writing, an over 5% recovery from overnight lows, according to CoinDesk data. Yang expects volatility to stabilize.

“Sentiment is deep in extreme fear, but bitcoin’s price seems to have found a base near $60K. If price action stabilizes, volatility looks stretched and could quickly pull back,” he said.

Advertisement

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Crypto World

Bitcoin ETFs Record $434M Outflows Amid BTC Slide Below $70K

Published

on

Bitcoin ETFs Record $434M Outflows Amid BTC Slide Below $70K

Bitcoin exchange-traded funds (ETFs) continued to see outflows on Thursday, shedding almost $1 billion over the past two days as debate grows over their potential impact on the market.

Data from SoSoValue shows that spot Bitcoin (BTC) ETFs recorded $434 million in net outflows on Thursday, following $545 million in redemptions the previous day.

Monday’s $561 million in inflows was not enough to offset losses, leaving net weekly outflows at about $690 million as of Friday morning.

Spot Bitcoin ETF flows since Monday. Source: SoSoValue

The latest withdrawals came amid a sharp drop in Bitcoin’s price, which briefly touched $60,000 for the first time since October 2024, according to CoinGecko.

The community has struggled to identify clear catalysts for the downturn, and some have started to criticize Bitcoin ETFs even as analysts point to their resilience.

Advertisement

ETFs face “paper Bitcoin” criticism

The launch of spot Bitcoin ETFs in January 2024 was one of the most anticipated events in Bitcoin history, and was widely expected to accelerate BTC adoption through institutionalization.

Some analysts, however, argue that the institutionalization of Bitcoin via ETFs may have done more harm than good, claiming it contributed to undermining the asset’s scarcity — a key feature of Bitcoin’s fixed supply of 21 million coins.

“The same 1 BTC can now support an ETF unit, a future contract, a perpetual swap, an options delta, a broker loan, a structured note. All at once,” Bob Kendall, technical analyst and author of The Kendall Report, said in a Wednesday X post.

“That is not a market. That is a fractional reserve price system,” he added.

Advertisement
Source: Bob Kendall

Kendall’s concerns echo those previously raised by his peers about Bitcoin ETFs becoming a tool for Wall Street to “trade against” Bitcoin.

Before crypto ETFs launched, Josef Tětek, a Bitcoin analyst at hardware wallet provider Trezor, warned that such products could enable the “creation of millions of unbacked Bitcoin,” potentially depressing the value of actual Bitcoin.

Related: BlackRock’s IBIT hits daily volume record of $10B amid Bitcoin crash

As of Friday, total assets in spot Bitcoin ETFs stood at about $81 billion, with cumulative net flows totaling $54.3 billion, according to SoSoValue.

Altcoin ETFs showed a mixed picture, with Ether (ETH) funds shedding $80.8 million in outflows, while XRP (XRP) and Solana (SOL) ETFs saw minor inflows at $4.8 million and $2.8 million, respectively.

Advertisement

Magazine: Bitcoin’s ‘miner exodus,’ UK bans some Coinbase crypto ads: Hodler’s Digest, Jan. 25 – 31