Bitcoin Options Signal Limited Upside as Volatility Drops

Bitcoin is sailing into calmer waters following last week’s tumultuous event, which triggered the worst cascading set of liquidations in crypto’s 16-year history. While Bitcoin bounced on Monday, the momentum has slowed, leaving it to trade at roughly $113,500, down about 1.5% over the past 24 hours according to CoinGecko data. The market appears to be finding its footing after the dramatic sell-off that characterized the Black Friday crash.

Heightened bearish activity during last week’s sell-off has led to a significant uptick in put options expiring on October 31, according to Hendrik Ghys, founder of futures and options exchange Thalex Global. This options activity reflects continued caution among traders despite the initial recovery from the crash lows. The increased put volume indicates that market participants are positioning for potential further downside in the near term.

Implied volatility, a key metric reflecting market expectations of future price swings, has repriced downward to the low 40s in the short term and around 45% for longer horizons, as noted by Ghys. The drop indicates that the initial panic following the crash has subsided, with traders recalibrating their risk assessments. This compression in volatility suggests the market is entering a period of relative stability after the extreme moves of the previous week.

Market makers, who were long gamma heading into the event, remain in that position post-crash, Ghys noted. This positioning creates a significant technical headwind for price appreciation. When market makers are long gamma, they are forced to sell during rallies and buy during dips to hedge their positions and offset losses. This dynamic effectively suppresses price movements and contributes to the current range-bound trading environment.

Ghys takes a cautiously optimistic stance, noting that market makers are likely to reduce or close their positions at ‘better prices than a week ago,’ provided volatility subsides, allowing Bitcoin to hold its ground. This suggests that once the gamma overhang is cleared, the market could see more organic price discovery without the artificial suppression from derivatives positioning.

Despite the current stabilization, analysts see potential for further near-term pressure. ‘While short-term volatility persists—potentially pushing Bitcoin toward $100,000 support and Ethereum to $3,600—we see this as a healthy correction that clears weak hands and sets the stage for renewed accumulation,’ stated Ryan Lee, chief analyst at universal exchange Bitget. This perspective frames the potential decline not as a fundamental breakdown but as a necessary market-clearing event.

The $100,000 level represents a critical psychological and technical support zone that could attract significant buying interest if tested. For Ethereum, the $3,600 level serves as a similar important threshold. The fact that analysts are identifying these specific levels suggests they represent consensus support zones where institutional and retail buyers might re-enter the market.

Despite the short-term uncertainty and potential correction risks, Lee maintained a bullish outlook in the long run, noting that Bitcoin could rebound to $130,000 and Ethereum to $4,800, citing ‘institutional inflows via exchange-traded funds and digital asset treasuries.’ This long-term optimism is rooted in the structural demand from institutional investors who continue to allocate to cryptocurrency through regulated vehicles like ETFs.

The current market environment represents a classic ‘wall of worry’ scenario where short-term concerns create opportunities for long-term investors. The combination of suppressed volatility, market maker positioning, and potential support levels creates a setup where any move toward $100,000 could represent an attractive entry point for those with a longer time horizon.