Post-Drop Market Realities of Bitcoin Price

The price of Bitcoin has dropped by approximately 35% in the last 8 days, drawing the attention of investors. However, during this process, there has been a 15% recovery from the bottom level. It is essential to consider whether this rise indicates a return of confidence in the market or if it harbors deeper uncertainties.

Option data reveals the psychology behind market price movements more clearly. The “volatility” observed in the options market helps investors predict how sharply prices can move. In recent selling waves, one-week implied volatility has surged above 100%, indicating that the market thinks Bitcoin's price could show extreme movements in the short term. Such a volatility spike is typically observed during panic moments. Investors rush to hedge their positions to limit losses in case of further price declines, which drives up option prices.

Additionally, the DVOL (Dynamic Volatility) indicator measures the overall stress level in the Bitcoin market. Although DVOL has decreased somewhat at the time when prices hit the bottom, it still hovers around 65 levels. Last week this value was in the 40s, and the difference indicates that the market has not fully relaxed. In other words, investors are maintaining a cautious stance, fearing that severe price movements may continue.

Recent data shows that short-term put options are approximately 28% more expensive than call options. This is one of the highest levels seen in 2023. It indicates that investors are willing to pay more to protect against potential steep declines. More than 73% of the option trades in the last 24 hours have been put-oriented. This ratio proves that a significant portion of investors is taking precautions against the risk of a decline rather than expecting an upward movement. The weekly put-call ratio remains at 1.3, signaling that the downward risk perception in the markets is still dominant.

This rise in Bitcoin's price may suggest that panic selling has ceased. However, a cautious stance is still observed in the options market. The high volatility, the expensive cost of insurance against declines, and the defensive position of investors indicate that the market has not truly relaxed, but rather that the selling pressure has temporarily decreased. This data highlights that uncertainty in Bitcoin persists, and investors are moving carefully.