BTC Sell-Off Sparks Most Extreme Crypto Derivatives Positioning Since 2022
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After last Thursday’s (Feb 5th, 2026) flash crash pushed BTC briefly to $60K, sentiment in derivatives markets has soured further.
Short-dated BTC and ETH implied volatility surged to levels last seen during the collapse of the FTX exchange in November 2022, as the demand for downside protection against further drops in spot price rose to multi-year highs.
The 50+% drawdown in BTC from its October 2025 all-time high dragged the rest of the crypto market down with it – with ETH falling below $2,000 and SOL returning to 2023-levels. Funding rates across the majority of large-cap altcoins turned negative, with the 7-day average funding rate for SOL falling to its lowest since the October 10, 2025 liquidation.
Notably, BTC dominance has held steady despite the drawdown, with capital flowing out of the broader crypto market proportionally rather than rotating into Bitcoin as a relative safe haven.