A Q1 Recovery for Bitcoin? | Presented by CME Group

Summary

• Bitcoin options volatility hit multi-year highs on February 5th, signaling market stress.
• The 25 delta risk reversal plunged to its most negative level since November 2022, indicating high premiums for downside protection.
• This extreme fear has persisted since August 2023, diverging from price rises, which often signals a potential reversal.
• After Bitcoin's 50% correction from October highs, implied volatility exploded but has cooled since February 6th.
• Current implied volatility remains elevated compared to last year's average of 46% for both 25 delta calls and puts.
• March 2026 expiry shows $660 million in call open interest versus $240 million in puts, a 3:1 ratio.
• This concentration suggests smart money is positioning for a Q1 recovery.
• The market is divided: near-term risk aversion is high, but out-of-the-money call selling and March calls indicate traders are either betting on a trend reversal by end of Q1 or generating yield.