Bitcoin markets are currently experiencing significant turbulence, marked by heightened fear among traders as options data reflects the highest level of anxiety seen in a year. A sharp correction in Bitcoin’s price, which dropped by 10% between Wednesday and Thursday, has raised concerns about a potential deeper selloff, revisiting the $81,000 level for the first time in over two months. This downturn followed notable outflows from spot Bitcoin exchange-traded funds (ETFs), coinciding with a substantial decline in gold prices.
Investors are increasingly wary following a cumulative $2.7 billion net outflow from US-listed spot Bitcoin ETFs since January 16, a figure representing about 2.3% of total assets under management. The downward pressure has led to questions about the integrity of the $80,000 psychological support level. Some traders speculate that institutional demand for Bitcoin might be stagnating, particularly in light of gold’s recent impressive 18% gain over three months, which may be overshadowing Bitcoin’s standing as a preferred store of value.
Amid these fluctuations, another layer of anxiety has emerged concerning the potential threat posed by quantum computing to the cryptographic foundations that secure Bitcoin and other cryptocurrencies. In response, Coinbase has taken proactive measures by forming an independent advisory board to assess these risks, with a commitment to release public research by early 2027. This development arrives against the backdrop of Jefferies withdrawing Bitcoin from its core portfolio due to long-term security concerns associated with quantum technology. However, key figures in the cryptographic community, like Blockstream co-founder Adam Back, argue that there is no imminent quantum risk, stating that current advancements in the technology remain in their infancy.
As traders grapple with these comprehensive challenges, Bitcoin options have turned decidedly bearish. On Friday, the BTC options delta skew surged to 17%, marking its highest level in over a year and indicating heightened fear in the market. Typically, under neutral conditions, put options sell for a premium of 6% or less relative to their call counterparts. The current skew suggests extreme fear, likely leading to volatile price movements as market makers brace for further setbacks.
The liquidation of approximately $860 million in leveraged long Bitcoin futures positions between Thursday and Friday indicates that many traders were caught off-guard by market dynamics. While leverage has exacerbated the downturn, it is notable that the aggregate open interest in BTC futures decreased to $46 billion on Thursday, down from $58 billion three months ago. This drop in leverage is not necessarily a negative sign; instead, it implies a healthier market due to the elimination of excessive risk.
Analysts often track demand for stablecoins, particularly in China, to evaluate risk sentiment within the crypto market. The current situation reports a 0.2% discount in stablecoin trading—an improvement from the 1% discount observed the previous week—suggesting moderate outflows from the market. Despite the recent turbulence, some analysts view this as a period of necessary adjustment following a 13% price drop over the last 14 days.
Looking ahead, the ability of Bitcoin to reclaim the $87,000 level and restore bullish momentum seems contingent on investor sentiment, specifically their understanding that no asset remains immune to corrections, especially during periods marked by macroeconomic uncertainties and socio-political pressures that trigger a rush towards cash and short-term US Treasuries.
