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Risk appetite has deteriorated sharply over the last week, with nearly $500B wiped from total crypto market cap since late January.
BTC’s 40% drawdown from the $126K peak accompanied by a fall in perp open interest from ~$5B to ~$3.6B.
The move has triggered the largest level of liquidations across crypto markets since the Oct 10, 2025 crash and sees BTC trade below the average purchase level across all spot ETF holders for the first time since before President Trump’s reelection.
However, derivatives market positioning is surprising: while demand for short-dated options has spiked higher, the volatility implied by options prices is still lower than the level of volatility that spot prices have moved with over the last seven days. In addition, the premium assigned to out-the-money protective puts is higher, but not as high as in previous extreme sell-offs.
Nearly $500B from crypto’s total market-capitalization has been wiped out since late January 2026, following last weekend’s selloff. BTC fell to an intraday low just shy of $70K, down more than 40% from its all-time high and back to levels during November 2024's re-election of President Trump.
In fact, last weekend’s plunge in spot prices has resulted in the highest level of liquidations since October 10, 2025 - with open interest in BTC-denominated perpetual futures contracts falling from $5B down to $3.6B.
Does that mean crypto is in a full fledged ‘Crypto Winter’ bear market?
While a 40% drawdown from $126K is undoubtedly a significant move, there are parallels between now and the mid-cycle correction in 2021 which too saw BTC fall 40% from the then-ATH before recording a second peak in November of the same year.
Firstly, the current correction shows signs of flow-driven price action; and less of fundamental or structural reasons. Trade volumes in both spot and perpetual futures, for example, are significantly lower than October 10.
Secondly, despite a jump up in realized volatility, the response from options markets relative to historical bear market selloffs has so far been lacklustre. In 2022, for example, the demand for optionality spiked to extreme levels, with 7- and 30-day ATM implied volatility trading above 100%.
Not only is implied volatility closer to 50% for short-to-mid-dated options this time around, the ratio of BTC ATM implied volatility to realized volatility also indicated that options markets have priced in lower forward-looking volatility expectations than the volatility that has been recently delivered (a ratio below 1). Compare that to 2022 for example during the FTX crash when implied volatility averaged 1.3x that which was delivered by spot prices.
Another way to compare the demand for downside protection and the market’s expectation of further selloffs is through the 25-delta put-call skew ratio.
While BTC and ETH volatility smiles currently assign a 15 vol point and 18 vol point premium towards put options, we are far below the extremes seen in 2022, when put contracts traded with a premium of more than 60%.
Instead, current levels of premiums in put options relative to calls are closer to the mid-cycle correction in 2021, when put-call skew was between -10% and -15% for BTC.