Bitcoin crashed to $58,700 on Thursday and now options traders are convinced it will crash as far as $52,000 before the year is over, which would be its lowest level since August 2024.
That decline saw Bitcoin fall by almost 52% from its all-time high and left the OG crypto below the $60,000 level, which traders had sought to defend throughout the year. This area has remained supportive of the price since February, again defended for the first two weeks of June before succumbing to an advance to just above $67,000.
The outlook for options trading is not looking good at the moment. Investors are paying a lot to protect themselves, and most of these are expecting further downward movement if Bitcoin continues to drop.
This happened mainly on the iShares Bitcoin Trust ETF (NASDAQ: IBIT), whereby volume on Thursday was close to 1.1 million contracts, nearly twice the average daily volume over the last 30 days, according to Cboe Global Markets (CBOE) LiveVol.
Traders buy puts as Bitcoin breaks below the price level bulls kept defending
The IBIT trade was heavily tilted toward puts. Thinkorswim data showed traders bought about 275,000 puts, while call buying stayed below 129,000 contracts.
Of the total options premium for IBIT of $187 million, $144 million came from puts, according to SpotGamma figures.
The most active options were mostly bearish, with only one out of the 20 most-traded IBIT options being a call option. The most active option was the put at the strike price of $32.50, expiring Friday. It required BTC to fall by an additional 4.5% to become profitable.
The implied volatilities from the IBIT stock, however, were still far from reflecting a complete market collapse, at 53, indicating around 3% daily movements in either direction.
The options for July 31 represented the equally likely case. This suggested that there was a 48% probability that IBIT would be less than $30.50 at the end of the following month. This means about 10% further decline from the current price. The probability of a 10% increase was a bit higher at 55%.
Leverage turns the Bitcoin selloff into a bigger problem for crypto markets
The pressure went beyond options desks. Crypto market data providers said roughly $450 million in leveraged long positions were liquidated in only 60 minutes during the morning drop.
This selloff also came while crypto failed to follow stocks higher. In recent years, Bitcoin has often traded like a high-risk equity bet. That link now looks weaker. Bitcoin is down 32% this year, while Solana has fallen 47%. Both tokens have struggled even when equity markets have rallied.
One of the reasons is the retail demand. Small-time traders who would normally ride on the wave of cryptocurrency’s price fluctuation are now engaging in AI-related stocks. This has redirected the focus from crypto to equities making the big price moves due to news surrounding AI.
Bitcoin whale Strategy, meanwhile, (NASDAQ: MSTR), had 505,000 put trades against 403,000 calls. Traders bought 83,000 puts, sold 72,000 calls, and bought just under 58,000 calls. That mix was not exactly a love letter to risk.
Strategy now owns 847,363 Bitcoin at an average purchase price of $75,651 per coin. With Bitcoin near $58,800, that position sits about $14.3 billion below its cost basis.
The stock has been punished. Since last October’s flash crash, MSTR has lost more than 80% of its value. Since November 2021, the shares have gained less than 22%, even though Bitcoin spent parts of that period reaching record highs.
With the present market structure, traders are left facing various levels of downside targets. While some believe that Bitcoin will test $50,000 next, others expect even more room for downward price movement before hitting the bottom at $30,000 or less.
With Bitcoin already below $59,000, $450 million in longs wiped out in an hour, and Strategy down more than 80% from its crash-era level, options traders are treating $52,000 as a live risk for 2026.
