Bitcoin’s fear gauge spikes to highest level since FTX collapse
Bitcoin’s volatility index, which functions as a crypto market fear gauge, has surged to levels not seen since the FTX exchange collapsed in 2022. The BVIV index, which measures expected price turbulence over four weeks, jumped from around 56% to nearly 100% on Thursday as bitcoin’s price dropped from $70,000 to nearly $60,000.
I think what’s interesting here is that this isn’t just a small blip. The index serves as a crypto version of the VIX, the traditional market’s fear gauge that tracks S&P 500 volatility. When traders get nervous, they start bidding up options prices to protect themselves, and that’s exactly what we’re seeing now.
Options trading shows widespread panic
Cole Kennelly from Volmex Labs noted that bitcoin’s 30-day implied volatility surged from just over 40 to 95 in just a few days. That’s a massive move, and it reflects what he called “a wave of panic” sweeping through crypto markets.
Implied volatility basically measures how much traders expect prices to swing, and it’s driven by options demand. When people are scared, they buy more options for protection. On Thursday, traders scrambled to buy puts—options that profit when prices fall—with the top five most traded options all being puts at various strike prices.
Some of those puts were at $20,000, which seems extreme but shows how worried some traders are. It’s like they’re preparing for a worst-case scenario.
Institutional concerns driving the volatility
Jimmy Yang from Orbit Markets pointed out something important: his clients rushed to buy downside protection because they’re worried about digital asset treasuries that bought bitcoin at higher prices. If those firms have to liquidate at a loss, it could trigger more selling and push prices even lower.
He mentioned that short-dated volatility surged more than longer-dated volatility, which created what’s called a steeply inverted volatility curve. That basically means people are more worried about what happens in the next few weeks than what happens months from now.
“With significant uncertainty still ahead—particularly around the DATs and the risk of further unwind cascades, we’ve seen a lot of client demand for downside protection,” Yang added.
Some stabilization emerging
Interestingly, bitcoin has bounced back a bit since the worst of the selling. At the time of writing, it’s recovered to over $64,000, which is about a 5% gain from the overnight lows.
Yang thinks volatility might stabilize if price action settles down. He noted that sentiment is “deep in extreme fear,” but bitcoin seems to have found some support around $60,000. If prices can hold here, the elevated volatility readings might pull back.
It’s worth remembering that volatility works both ways—it can spike up quickly, but it can also come down just as fast if the panic subsides. The market’s reaction feels a bit overdone to me, but then again, I’ve been wrong before about these things.
What’s clear is that traders are nervous, and they’re paying up for protection. Whether this is just a temporary scare or something more serious remains to be seen. The fact that we’re seeing FTX-era volatility levels suggests this isn’t just ordinary market noise—it’s genuine concern about where prices might go next.
