In the aftermath of a record-breaking crypto liquidation event last Friday, investors in the options market are bracing themselves for further volatility. As reported by Reuters, many participants are adopting defensive strategies to protect their funds against potential declines in major cryptocurrencies like Bitcoin and Ether.
A staggering $19 billion in leveraged crypto positions was liquidated in just one day as fear-driven selling coincided with low liquidity conditions. This intense selloff was sparked by U.S. President Donald Trump’s announcement of a 100% tariff on imports from China, coupled with threats to impose export restrictions on critical software, causing unease among traders and a scramble to unwind risky investments.
Market analysts have characterized this incident as the largest single-day liquidation in crypto history—an event exceedingly more significant than the crashes witnessed in February 2025 and March 2020, as well as the collapse of FTX in November 2022, with magnitudes of nine and nineteen times larger, respectively.
During the turmoil, Bitcoin plummeted to a low of $104,782.88 on October 10, marking a 14% drop from its previous peak of $122,574.46 reached just days earlier. Following this decline, Bitcoin managed to recover slightly, trading at $115,718.13, which represented a marginal 0.6% increase for the day. The leading cryptocurrency had touched an all-time high of over $126,000 on October 6.
Meanwhile, Ether, the second-largest cryptocurrency, experienced a 12.2% dip, hitting a low of $3,436.29 before bouncing back to $4,254, which accounted for a 2.4% gain on the day. Smaller tokens faced even more severe losses, with HYPE tumbling 54%, DOGE 62%, and AVAX declining 70%, although these tokens managed to recover some of their steep losses later.
In response to the escalating situation, Trump tempered his initial stance towards China, reassuring that “it will all be fine” and emphasizing the desire not to “harm” China. His remarks contributed to a stabilization in market sentiment, even as China accused the U.S. of escalating tensions while refraining from immediate retaliatory actions.
Commenting on the broad market volatility, Sean Dawson, head of research at Derive.xyz in Canberra, noted, “Last Friday, you saw volatility just jump across the board, not only for short-dated, but also for long-dated maturities. The sentiment surrounding short-dated volatility indicates that many are concerned about potential downturns.”
Market data from crypto options platforms revealed a significant uptick in put options for Bitcoin and Ether, signaling traders engaging in protective measures against additional price declines. In particular, put options with strike prices of $115,000 and $95,000, set to expire on October 31, were popular among Bitcoin traders. Furthermore, a notable shift was observed from buying calls at a $125,000 strike for the October 17 expiry, indicating a growing belief in imminent short-term weakness.
For Ether, co-founder of Derive.xyz Nick Forster pointed out that traders concentrated on strike prices of $4,000 and $3,600 for October expiries, along with increased purchases of $2,600 puts for December 26. These trades illustrate the rising bearish sentiment as investors head toward the year’s end.
Despite the upheaval in the market, some analysts contend that certain segments remain relatively sturdy. Willy Woo, a prominent on-chain analyst, observed that Bitcoin’s investment flows have held up better than anticipated, allowing it to navigate the downturn more effectively compared to traditional equities. He added that while Bitcoin flows appeared resilient, Ether’s flows had diminished significantly, and Solana showed signs of continued weakness, suggesting that capital from altcoins might be shifting back into Bitcoin rather than exiting the crypto market entirely.
Altcoins, which encompass all cryptocurrencies other than Bitcoin, are commonly regarded as high-risk, high-reward investments. While some can yield substantial profits, many others suffer from diminishing liquidity or outright failures over time. Conversely, Bitcoin is frequently considered a “blue-chip” asset within the crypto domain, appealing to institutional investors for its comparatively lower risk profile.
As Nic Puckrin, co-founder of The Coin Bureau, remarked, “The silver lining is that this (crash) has purged excessive leverage and reset the risk landscape in the market, at least for now.” However, he added that Bitcoin is poised to face another significant challenge in breaking through crucial resistance levels to achieve a meaningful new all-time high before the end of the year.
(Photo by Norman Wozny)
See also: US SEC weighs tokenised stock trading on cryptocurrency exchanges
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