After the largest crypto liquidation on record last Friday, investors in the options market are preparing for more turbulence. Many are taking defensive positions to shield themselves from another potential drop in bitcoin and ether, according to Reuters.
More than $19 billion in leveraged crypto positions were wiped out in a single day as panic selling met thin liquidity, market participants said. The selloff followed US President Donald Trump’s announcement of a 100% tariff on Chinese imports and a threat to impose export restrictions on key software — a move that rattled traders and fueled a rush to unwind risky bets.
Analysts described the event as the biggest 24-hour liquidation in crypto history — nine times larger than the February 2025 crash and 19 times greater than both the March 2020 market meltdown and the collapse of FTX in November 2022.
Bitcoin dropped to $104,782.88 between October 10 and 11, a 14% fall from its Friday peak of $122,574.46. It later recovered slightly to trade at $115,718.13, up 0.6% for the day. The world’s largest cryptocurrency had reached a record high above $126,000 on October 6.
Ether, the second-largest digital asset, fell 12.2% to a low of $3,436.29 before rebounding to $4,254 — a 2.4% daily gain. Meanwhile, smaller tokens suffered deeper losses: HYPE plunged 54%, DOGE 62%, and AVAX 70%, though all later pared some of their declines.
Trump later softened his stance toward Beijing, saying “it will all be fine” and that the US did not want to “hurt” China. His remarks helped steady sentiment, while China accused the US of escalation but held off on retaliatory measures.
“Last Friday, you saw volatility just jump across the board, not only for short-dated, but also for long-dated maturities. The sentiment around short-dated volatility is that more people are worried about downward turns,” said Sean Dawson, head of research at Derive.xyz in Canberra.
Data from the crypto options platform showed heavy put option buying for bitcoin and ether, indicating traders were hedging against more declines. In bitcoin, traders bought puts with strike prices of $115,000 and $95,000 expiring October 31, Dawson said. There was also a shift from buying to selling calls at the $125,000 strike for the October 17 expiry — a signal that some expect short-term weakness.
Calls in options markets represent bets on price increases.
For ether, Nick Forster, Derive. xyz’s co-founder, said traders focused on the $4,000 and $3,600 strike levels for October expiries, with additional buying of $2,600 puts for December 26. He said those trades show rising bearish sentiment heading into the end of the year.
Despite the shakeout, some analysts say parts of the market remain steady. Willy Woo, a well-known onchain analyst, said bitcoin investor flows have held up better than expected, helping it weather the downturn compared to stocks.
Woo added that ether flows have dropped sharply, while Solana continues to weaken. He suggested that funds from altcoins are likely shifting into bitcoin rather than exiting the market entirely.
Altcoins — cryptocurrencies other than bitcoin — are generally seen as high-risk, high-reward bets. While some generate large returns, many lose liquidity or fail over time. Bitcoin, by contrast, is often viewed as a “blue-chip” asset in the crypto space, favored by institutional investors.
“The good news is that this (crash) has cleaned out the excessive leverage and reset the risk in the market, for now,” said Nic Puckrin, co-founder of The Coin Bureau.
“However, bitcoin now faces another uphill battle to break past key resistance levels that will allow it to reach a meaningful new all-time high this year,” he added.
(Photo by Norman Wozny)
See also: US SEC weighs tokenised stock trading on cryptocurrency exchanges
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