Crypto Market Struggles: Investors Turn to Options for Protection

The current crypto bloodbath is driving investors to seek protection through the purchase of options.

According to the Bybit X Block Scholes crypto derivatives analytics report, the ongoing market downturn has led investors to use options as a hedging strategy against further losses.

When Trump announced the establishment of a U.S. crypto strategic reserve consisting of Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Solana (SOL), and Cardano (ADA), prices for these assets initially surged. However, the excitement was short-lived as Trump’s announcement of new tariffs on imported goods deterred investors from riskier assets due to increased macroeconomic uncertainty.

Sudden Price Swings

The rapid price changes caused by the reserve announcement lifting crypto prices and the tariff news pushing them down have heightened market volatility.

Consequently, realized volatility (actual price movements) now exceeds implied volatility (expected price movements by options traders). This shift has prompted traders concerned about further asset declines to buy short-term options for hedging.

Source: Bybit X Block Scholes crypto derivatives analytics report

The growing interest in put options indicates that traders anticipate significant short-term declines, echoing the forecasts of several analysts. For instance, Arthur Hayes recently predicted that Bitcoin could retest the $78,000 level, possibly falling lower to $75,000.

> “An ugly start to the week. Looks like $BTC will retest $78k. If it fails, $75k is next in the crosshairs. There are a lot of options OI struck $70-$75k, if we get into that range it will be violent.”
> — Arthur Hayes (@CryptoHayes) March 9, 2025

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