Bitcoin Crashed on Options. Here’s Why That Changes Everything Going Forward

Why this report matters

Bitcoin declined by 28% over the past week, marking one of the sharpest weekly corrections of the current cycle. Despite total Bitcoin options notional declining by 48% since October 10, 2025, from $52 billion to $27 billion, trading activity remained exceptionally elevated, with Bitcoin options recording their third-most-active day on record.

In our Friday, February 6 report, we noted that “the $60,000–65,000 region represents the next area where prior consolidation and psychological support could slow downside momentum. Within this framework, the decline from $125,000 to $62,000 can be interpreted as Wave A. While a consolidation phase or short countertrend rally (Wave B) is possible in the near term, the broader structure suggests that another leg lower (Wave C) remains likely.”

Just thirty minutes later, Bitcoin bottomed around $60,000, with both the crash and the subsequent rebound largely driven by dynamics within the options market itself. This underscores why understanding positioning, liquidity gaps, and shifts in implied volatility has become increasingly critical.

Derivatives activity is now exerting a dominant influence on price action, with a significant portion of Bitcoin ETF flows linked not to long-only investment demand, but to facilitating options market-making and volatility trading strategies. In effect, derivatives positioning is increasingly driving spot price behavior, rather than simply responding to it. This is a material change from prior liquidations with some of the effects explained below.

BTC liquidations (LHS, $ millions) vs. BTC Futures Volume (RHS, $ billions)

Market Updates