Warning of $75,000 Collapse Bomb...Bitcoin 'Struggles' in $3.2 Billion Downside Hedge Trap

▲ Bitcoin (BTC)/AI generated image

After Bitcoin (BTC) was recently rejected near the top of its range and pushed back below $78,000, the options market continues to brace for downside risk. Glassnode analyzed that while volatility expectations are compressed in the Bitcoin options market, demand for downside hedges remains high, and a gamma structure has formed that could amplify bearish trends if the price approaches the mid-$75,000 range.

NewsBTC reported on May 23 (local time), citing Glassnode data, that Bitcoin had fallen below $78,000 after being rejected near its recent local range high. Glassnode explained that Bitcoin options data shows investors are paying more for downside protection than for chasing upside, in terms of positioning, volatility expectations, and market sentiment.

The most prominent signal appeared in implied volatility. According to Glassnode, Bitcoin's 1-week implied volatility fell from 39% to around 31% earlier this week, and long-term implied volatility also saw a slight decrease. This means the market is not pricing in a disorderly directional breakout in the short term. Glassnode stated, “The market is once again pricing in a quieter short-term environment.”

However, reduced volatility expectations do not imply bullish positioning. Glassnode pointed out that the 25-delta skew remains in "put territory" after the rejection near $78,000. The 1-week skew, after once hitting 24%, eased, but the trend of put options trading at a higher premium than call options continued. Glassnode explained, "Traders continue to prefer downside protection."

The same caution was confirmed in the skew index ratio. Most expiry ranges remained below 1, indicating that put options were more expensive than call options. However, Glassnode analyzed that call premiums remained in the 6-month expiry range, suggesting that long-term upside demand has not completely disappeared. Short-term positioning is defensively tilted, with upside expectations maintained only in some parts of the long-term structure.

The gamma structure was presented as a factor increasing further downside risk. Glassnode stated that there is a large cluster of short gamma near $75,000, with negative exposure of approximately $3.2 billion below the spot price. In the options market, short gamma positions can cause dealer hedges to amplify spot movements, thus increasing volatility if the price approaches a key range. Glassnode assessed, "This structure can accelerate downside volatility near $75,000."

At the same time, positive gamma clusters near $78,000 and $80,000 were suggested to act as resistance. Options flows over the past week also leaned defensively. Put purchases accounted for 25% of the premium, and call purchases also accounted for 25%, but the proportion of call sales remained high at 25.7%, signaling limited upside expectations. Glassnode concluded that, considering the compression of short-term implied volatility, widened volatility spreads, skew remaining in put territory, defensive flows, and an accelerating short gamma zone below the spot price, the options market remains in a cautious position.

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