Bitcoin Eases Extreme Fear in Options Market, Can It Halt Five-Month Losing Streak?

▲ Bitcoin (BTC)

Extreme fear in the Bitcoin (BTC) options market is gradually easing. However, investors continue to maintain a defensive stance against potential price declines as they navigate ongoing market uncertainty.

According to cryptocurrency media outlet NewsBTC on February 21 (local time), as Bitcoin increasingly faces the possibility of recording five consecutive monthly declines, options market participants are anticipating reduced volatility while remaining cautious about market fragility. Analysts at on-chain analytics firm Glassnode noted that at-the-money (ATM) implied volatility has fallen sharply to around 48% of its recent peak. This suggests that market participants are no longer heavily betting on an immediate price crash.

The volatility index DVOL has also dropped by about 10 points over the past two weeks, indicating that extreme hedging demand has eased. The short-term Volatility Risk Premium (VRP) turning positive further supports the view that fear-driven pricing is normalizing. As expectations for unexpected large-scale volatility decline among investors, panic sentiment in the market appears to have temporarily subsided.

Despite these signs of easing volatility, investors’ actual positioning remains strongly defensive. While extreme fear has diminished, demand for protective put options as insurance against price declines remains firm. Last week, put options accounted for roughly two-thirds of total options activity, with outright put buying making up about 34% of the total flow, clearly reflecting investors’ caution over downside risks.

Taker flow data also supports the view that investors are actively hedging against potential further downside. While the options market assigns a low probability to an immediate resurgence of turmoil, it is building solid defensive positions in preparation for another possible downturn. Bitcoin is currently trading near $67,628, up 0.92% over the past 24 hours, as it searches for direction.

Participants in the digital asset market are proceeding cautiously, balancing short-term improvements in sentiment with the establishment of concrete defensive positions. Facing the unusual prospect of five consecutive monthly declines, investors are shedding extreme fear while simultaneously preparing contingency plans against an unexpected return to a bear market. Market attention is now focused on whether Bitcoin can defend key support levels and lay the groundwork for a meaningful rebound.

Disclaimer: This article is provided for investment reference purposes only, and we are not responsible for any investment losses arising from it. The content should be interpreted for informational purposes only.