Options investors are actively placing themselves in trades that provide protection against another possible freefall as they prepare for more volatility and additional drops in bitcoin and ether following last Friday’s largest cryptocurrency liquidation in history.
According to market players, panic selling and poor liquidity caused steep swings in the cryptocurrency market on Friday, resulting in more than $19 billion in liquidations across leveraged holdings. The decline occurred after U.S. President Donald Trump threatened to impose export limits on vital software and declared late Friday a 100% tax on Chinese imports.
According to cryptocurrency analysts, this was the biggest 24-hour wipeout in the history of the market, nine times greater than the February 2025 crash, 19 times bigger than the March 2020 meltdown, and 19 times bigger than the November 2022 FTX collapse.
During the October 10–11 session, Bitcoin dropped more than 14% from its peak of $122,574.46 on Friday, reaching as low as $104,782.88. At $115,718.13, it was up 0.6% at the time. On October 6, the largest cryptocurrency in the world reached a record high of almost $126,000.
The second-largest cryptocurrency, ether, fell 12.2% to $3,436.29 on Friday. At $4,254, it was up 2.4% for the day when it last changed hands.
HYPE (-54%), DOGE (-62%), and AVAX (-70%) all saw sharp declines before rebounding to report more moderate losses, causing altcoins to suffer even more.
But over the weekend, Trump rolled down his language against China, saying that “it will all be fine” and that the United States didn’t want to “hurt” China. The crypto recovery benefited from that. Although it did not implement any more actions, China blamed the U.S. for the escalation on Sunday.
There was a sudden spike in volatility last Friday for both short-dated and long-dated maturities. According to Sean Dawson, head of research at Derive.xyz in Canberra, “the general consensus regarding short-dated volatility is that more people are concerned about downward turns.”
Derive.xyz, a crypto options trading platform, reported strong “put” purchasing from traders in bitcoin and ether, indicating hedging against potential downside risks.
According to Dawson, there were significant purchases of options that conferred the ability to sell bitcoin at striking prices of $115,000 and $95,000 for the October 31 expiration. There was also a strong turnaround from call buying to selling at the $125,000 strike for the October 17 expiry, indicating a pessimistic short-term outlook.
Calls in the options market represent anticipation that the price will rise.
In the case of ether, traders concentrated on the $4,000 strike for the October 31 expiry and the $3,600 strike for the October 17 expiry, according to Nick Forster, co-founder of Derive.xyz. Significant buying of $2,600 puts for the December 26 expiration were also reported by him. He claimed that the strikes are a sign of escalating pessimism through the rest of the year.
Despite the disaster, Willy Woo, a renowned onchain crypto analyst with over a million X followers, remarked that bitcoin investment flows have been holding up well, which might explain why it performed better than predicted in the face of a severe drop in stocks.
When Solana continued to plummet, Woo claimed to have witnessed a significant drop in ether flows. Instead of exiting the system, he thinks that capital in altcoins is probably rotating into bitcoin.
Other than bitcoin, altcoins—also referred to as alternative coins—are cryptocurrencies that are frequently regarded as high-risk, high-reward ventures. While many altcoins lose liquidity or collapse, some generate enormous gains.
In contrast, Bitcoin is extensively owned by institutions and is considered a “blue-chip” cryptocurrency asset.
According to Nic Puckrin, a cryptocurrency analyst and co-founder of The Coin Bureau, the good news is that this crisis has eliminated excessive leverage and reset market risk for the time being.
However, bitcoin now faces another uphill struggle to break over crucial resistance levels, allowing it to set a new all-time high for the year.
