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With spot prices now in a consolidation phase following the sharp and violent selloff in early February, traders in options markets are showing a lack of interest.
BTC has spent the past two weeks rangebound between $65K and $70K, while ETH trades around the $2,000 mark.
ATM implied volatility levels have plunged off from their extreme 2022-esque highs, with traders anticipating far less volatility in the short-to-mid term, compared to only two weeks ago. The term structure of volatility for all three majors, BTC, ETH and SOL, is flat and compressed, while (as expected in a ~50% drawdown from all-time highs), volatility smiles are still skewed towards put options.
Block Scholes’ Risk Appetite Index measures the level of euphoria (above 1) or panic (below -1) in the spot market. Momentum in this index shows a strong relationship to spot returns.
The lack of drivers to move spot price has taken its toll on derivative markets.
As shown below, after reaching highs last seen in 2022, short-dated BTC at-the-money implied volatility has now dropped by more than half, trading just shy of 50% for 7-day options. That’s even lower than the volatility realized by spot prices over the past 7 days, suggesting options traders were quick to give up the dramatic demand for downside protection they expressed just two weeks ago.
We see a similar decline in implied volatility beyond just BTC.
The term structures of volatility for BTC, ETH and SOL are all currently compressed and flat, with traders pricing in minimal premiums for longer-dated options compared to near-term expiries. That significantly contrasts the positioning of two weeks ago, when short-dated volatility spiked across all assets on Feb 5, 2026, as BTC fell below $60K.
With risk-sentiment continuing to dwindle lower and spot prices close to (if not more than) 50% below their all-time high levels, it is unsurprising that volatility smiles continue to skew towards put options.
BTC traders are still willing to pay a premium for protection against further downside spot moves, though a far smaller premium than the -30% skew towards puts that we saw earlier in the month.