After experiencing a record-breaking wave of liquidations last Friday, investors in the options market are preparing for potential further volatility and declines in Bitcoin and Ethereum by actively positioning protective measures against a new round of potential sharp drops.

Market participants noted that panic selling and liquidity shortages caused severe volatility, leading to over USD 19 billion worth of leveraged positions being forcefully liquidated in the cryptocurrency sector last Friday.

Cryptocurrency analysts stated that this was the largest collapse within a 24-hour period in market history, nine times the scale of the February 2025 crash and 19 times larger than both the March 2020 crash and the November 2022 FTX collapse event.

Bitcoin fell as low as USD 104,782.88 between October 10 and 11, after reaching an all-time high above USD 126,000 on October 6. The second-largest cryptocurrency, Ethereum, dropped 12.2% last Friday to a low of USD 3,436.29.

Altcoins suffered even more significant setbacks: HYPE (-54%), DOGE (-62%), and AVAX (-70%) all experienced substantial pullbacks, followed by partial recoveries but still recorded considerable losses.

However, Trump softened his tariff rhetoric over the weekend, stating that ‘everything will be fine.’ This helped fuel a rebound in cryptocurrencies.

“We saw volatility spike across the board last Friday, not only in short-term options but also in long-term ones. Market sentiment on short-term volatility indicates growing concerns about downside risks,” said Sean Dawson, Director of Research at Derive.xyz in Canberra.

Data from the cryptocurrency options trading platform Derive.xyz shows that traders are heavily purchasing ‘put options’ for Bitcoin and Ethereum, signaling that the market is hedging against potential downside risks.

Dawson pointed out that in the Bitcoin market, there has been a significant volume of put options being purchased with strike prices of $115,000 and $95,000, set to expire on October 31. Meanwhile, call options with a strike price of $125,000 expiring on October 17 have sharply shifted from being predominantly bought to predominantly sold, indicating a short-term shift towards pessimism in the market.

Nick Forster, co-founder of Derive.xyz, stated that in the Ethereum market, traders are focusing on options with strike prices of $4,000 (expiring on October 31) and $3,600 (expiring on October 17). He also observed substantial buying of put options with a strike price of $2,600 expiring on December 26. He noted that these strike prices suggest bearish sentiment is persisting into the year-end.

Despite the sharp decline, Willy Woo, a top on-chain analyst with over a million followers on the X platform, pointed out that the flow of funds among Bitcoin investors remains robust, which could be why it outperformed expectations amid the stock market slump. In contrast, he observed a significant drop in Ethereum’s fund flows, while Solana continued to weaken. He believes capital from altcoins may be rotating into Bitcoin rather than exiting the cryptocurrency ecosystem altogether.

Altcoins (cryptocurrencies other than Bitcoin) are generally considered high-risk, high-reward investments. While some altcoins have indeed delivered substantial returns, many projects ultimately fail or lose liquidity. On the other hand, Bitcoin is widely regarded as a ‘blue-chip’ crypto asset and is commonly held by institutions.

“The good news is that this crash has cleared excessive leverage and temporarily reset market risks,” said Nic Puckrin, cryptocurrency analyst and co-founder of Coin Bureau. “However, Bitcoin now faces another tough battle: it must break through key resistance levels to achieve meaningful new all-time highs this year.”