Bitcoin's Wall Street-like fear gauge has surged 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 is the crypto equivalent of Cboe's VIX, rising during market panics as traders bid up options prices to hedge against declines.
Panic Gauge Mirrors FTX-Era Spike
"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 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. Implied volatility is influenced by demand for options—call options for upside bets and put options for downside insurance.
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.
Institutions Rush for Downside Protection
"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," said Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets. Yang's clients rushed to buy downside protection, fearing that digital asset treasuries that bought bitcoin at higher levels could liquidate at a loss, deepening the slide.
"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.