Crypto Bloodbath Triggers Surge in Options Buying as Volatility Spikes

The recent crypto market downturn, triggered by a combination of macroeconomic uncertainty and shifting investor sentiment, has led to a surge in options buying as traders seek to hedge against further losses.

According to a report by Bybit X Block Scholes, investors have turned to options as a means of protecting themselves from the volatile price movements in the market. This follows a sequence of price swings, starting with the announcement from U.S. President Donald Trump about creating a crypto strategic reserve, which initially pumped the prices of assets like Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), and Cardano (ADA). However, the rally was short-lived as Trump’s plans to impose new tariffs on imported goods triggered broader market concerns about increased volatility, causing investors to pull back from riskier assets, including cryptocurrencies.

These developments have caused significant price swings, leading to an increase in market volatility. The shift from implied volatility (expected price movement) to realized volatility (actual price movement) has prompted traders to buy short-term options as a form of protection. In particular, the demand for put options—betting on further price declines—suggests that many traders expect additional downside in the short term.

Many analysts, including BitMEX co-founder Arthur Hayes, have also predicted further declines in Bitcoin’s price, with some forecasting a retest of the $78,000 level or even a drop to $75,000. This sentiment is reflected in the options market, where traders are preparing for continued volatility in the coming days.