Bitcoin appears set to finish Wednesday's trading session relatively flat around the $24,000 mark. This offers market participants some much-needed breathing room after a hectic seven days of price action. Just one week ago, Bitcoin had dipped back below $22,000 for the first time in over three weeks. This move coincided with a drop in US equities, driven by concerns about the Federal Reserve's policy tightening.
A series of high-profile US bank failures—including Silvergate, SVB, and Signature Bank—triggered further risk-off sentiment. This pushed the price of BTC as low as $19,500 on Friday. For the first time in nearly two months, Bitcoin tested both its 200-day moving average and its realized price.
However, US authorities responded promptly to support deposits and introduced a new bank liquidity program. This helped USD Coin (USDC), a critical part of the cryptocurrency market infrastructure, regain its $1 peg. As a result, Bitcoin managed to stabilize by the end of last week.
Expectations that the banking crisis would discourage the Fed from further aggressive rate hikes, combined with a narrative that cryptocurrencies like Bitcoin serve as a safe haven from traditional financial system risks, helped propel Bitcoin to a mid-$26,500 level by Tuesday.
That marked Bitcoin’s highest level since last June. At its weekly peak, Bitcoin had surged over 35% from the sub-$20,000 lows seen just days earlier. This dramatic swing—from a multi-month low to a nine-month high in a matter of days—has led many traders to anticipate continued volatility. At least, that’s what the Bitcoin options market is signaling. Let’s take a closer look.
Traders Are Betting on Increased Bitcoin Volatility
Last week, Deribit’s Bitcoin Volatility Index (DVOL) jumped from around 50—not far from historic lows—to nearly 62, a two-month high. While this remains below the January high of 73, which occurred when Bitcoin broke above $20,000, it still indicates growing investor expectation of turbulent times ahead.
Deribit is the dominant cryptocurrency derivatives exchange. Although the current DVOL reading is well below the post-FTX crash peak of 114, the recent increase suggests that traders are preparing for more choppy conditions.
This makes sense when you consider that Bitcoin has broken through the key resistance zone around $25,200–$400. Technical analysts believe this opens the door for a potential rapid rally toward the next major resistance near $28,000, or even beyond $30,000.
At the same time, implied volatility—as priced by at-the-money (ATM) Bitcoin options—has also been rising. The 7-day ATM implied volatility reached 67.44% on Tuesday, its highest since mid-January, up from monthly lows around 42%. Implied volatility for 30-day, 90-day, and 180-day expiries also climbed to multi-week highs.
Traders Return to a Neutral Stance on BTC Price Outlook
When Bitcoin fell below $20,000 last week for the first time in two months, the outlook for BTC prices—as measured by the 25% delta skew of Bitcoin options expiring in 7, 30, 60, 90, and 180 days—reached its most pessimistic level in a year, ranging between -5 and -10.
The 25% delta options skew is a widely monitored metric. It indicates whether trading desks are charging more for upside or downside protection via the put and call options they sell to investors. Put options give the holder the right, but not the obligation, to sell an asset at a predetermined price. Call options give the right to buy.
A 25% delta skew above 0 suggests that dealers are charging more for call options than for puts. This implies stronger demand for calls, which can be interpreted as a bullish signal. Investors may be more eager to secure protection against—or bet on—price increases.
Following Bitcoin’s recovery to nine-month highs, the options market has returned to a broadly neutral outlook. The 25% delta skew for Bitcoin options across all monitored expiries has moved back close to 0.
However, another metric is signaling a more cautious tone. The put-call open interest ratio on Deribit rose to 0.54 on Wednesday, its highest level this year. That’s up from recent record lows below 0.40. A ratio below 1 means that investors still hold more call options (betting on price increases) than put options (betting on decreases). But the rising ratio suggests growing interest in downside protection.
👉 Explore real-time volatility tools
Frequently Asked Questions
What is implied volatility in Bitcoin options?
Implied volatility reflects the market’s expectation of future price fluctuations. It is derived from the current prices of options contracts. Higher implied volatility indicates that traders anticipate larger price swings in the future.
How does the 25% delta skew work?
The 25% delta skew measures the difference in pricing between out-of-the-money put and call options. A positive skew suggests that investors are paying more for upside protection (calls), which is often seen as bullish. A negative skew indicates higher demand for puts, which can be bearish.
Why did Bitcoin’s price recently surge?
Bitcoin’s price recovery was fueled by a combination of factors. These included regulatory responses to banking instability, expectations of a less aggressive Federal Reserve, and renewed interest in crypto as an alternative to traditional finance.
What is the significance of the $25,200–$400 resistance zone?
This resistance area was a key technical level. Breaking above it opened the door for a potential move toward $28,000 or higher. Many traders use these levels to set entry and exit points.
How can traders use options to hedge Bitcoin positions?
Traders can buy put options to protect against downside risk or call options to speculate on upside potential. Options provide flexibility and defined risk, making them popular for hedging and leverage.
What does a rising put-call ratio indicate?
A rising put-call ratio often signals that investors are becoming more cautious. While a low ratio suggests bullish sentiment, an increase may reflect growing demand for protective puts or expectations of a downturn.
Remember that trading cryptocurrencies involves significant risk. Market conditions can change rapidly, and it’s essential to conduct thorough research and consider your risk tolerance before investing.