While the price of Bitcoin (BTC) has been declining sharply, a striking positioning has emerged in the options market.
Jeff Park, ProCap’s chief investment officer and Bitwise advisor, said that Bitcoin futures put option open interest volume (OI) increased significantly at the end of December, and implied volatility returned to levels seen before the spot Bitcoin ETFs were listed.
According to data shared by Park, the $85,000 put position has the largest OI among Bitcoin options expiring on December 26, at nearly $1 billion. This figure surpasses the $620 million for $125,000 calls, $950 million for $140,000 calls, and $720 million for $200,000 calls for the same expiration.
Park noted that Bitcoin has fallen more than $40,000 in the last six weeks due to “ETF outflows, the Coinbase discount, structural selling, and liquidated long positions,” while implied volatility has never exceeded 80% since the FTX crash in 2022. Park noted that volatility remained subdued for a long time after ETF inflows peaked in March 2024, and that an upward trend has re-emerged in the last 60 days.
Market Dynamics and Volatility Trends
According to Park, the most critical change recently is the rise in implied volatility as Bitcoin's price declines. This correlation, rare in the post-ETF era, is interpreted as a sign that “the market may return to its old Bitcoin volatility regime.” Furthermore, the decline in the 30-day put skew to its lowest level of the year indicates increased demand for defensive positions.
Park notes that year-end options positions are dominated by call options at total par value, with large institutional investors still showing interest in upside options. However, whether volatility continues to rise, whether ETF flows accelerate again, and how IV reacts if the spot price falls further will determine the market's direction.
Park stated that “it's too early to call for a definitive regime change yet,” adding that a downward trend where volatility continues to rise could pave the way for a strong price bounce, but if volatility fades, the market could enter a more pronounced bear trend.