Bitcoin Fear Gauge Sparks Panic as Prices Slump to 60K

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Markets

What to know:

  • Bitcoin‘s volatility gauge, the BVIV, spiked to almost 100%, its highest level since the 2022 FTX collapse.
  • Traders rushed to buy put options, seeking insurance against further declines.
  • Volatility looks overstretched and could decline if prices stabilize.

Bitcoin’s wall-street-like alarm has risen as if to test the rafters of a tired theater, the memory of FTX’s fall still echoing in the wings while prices drift toward sixty thousand dollars. A faint smile-perhaps cynical, perhaps sleepy-accompanies the thought that fear, like a well-meaning but meddlesome aunt, keeps returning with the same tales.

Volmex’s bitcoin volatility index (BVIV), which measures the annualized expected price turbulence over four weeks, jumped to nearly 100% from 56% on Thursday. One might say it wears its fear on its sleeve, except the sleeve is made of risk and the fear is rather loud.

The index is crypto’s cousin to Cboe’s VIX, the so-called fear gauge, which signals the 30-day implied volatility of the S&P 500 and climbs when panic arrives in earnest as traders bid up options to hedge declines. The BVIV does the same, more often than not, especially when the audience seems inclined to gasp at the act.

“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. The telegram, like life, is full of dramatic pauses and occasionally useful reminders that we are all merely players on a stage.

Implied volatility is influenced by demand for options, contracts that promise pivoting fortunes for those brave enough to play the odds. Call options are used to bet on the upside, while put options are typically bought as insurance against price drops. A prudent person might note that insurance is the only product that makes sense in a world that promises both risk and spectacle.

On Thursday, traders scrambled to buy Deribit-listed options, especially puts, as bitcoin’s price tumbled 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; the $20,000 put bets that prices will slip below that threshold. It is a curious theater where safety nets look more dramatic than the performance they are meant to rescue.

“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. In other words, everyone wanted a cushion for the next act, even if the longer show remains uncertain.

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, potentially dragging the price lower in a sorrowful downbeat that would make even the most stoic banker sigh with regret over a poor choice of hedge.

“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. A prudent confession from those who prefer a soft cushion to a hard fall.

Bitcoin’s price has bounced to over $64,000 at the time of writing, a recovery of more than 5% from overnight lows, according to CoinDesk data. Yang expects volatility to stabilize, which, in the theater of finance, means expecting the curtain to behave.

“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.

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2026-02-06 06:51