Weekend selloff drives BTC/ETH derivatives into extreme bearish territory
A sharp precious-metals selloff—silver’s largest single-day plunge since 1980—spilled into crypto over the weekend, driving Bitcoin (BTC) back to about $74K (roughly 40% below its October ATH) and triggering the largest crypto liquidations since October 10, 2025. Derivatives metrics show pronounced bearish positioning: perpetual funding rates for BTC and ETH turned negative, short-dated futures-implied yields went into discount, and short-dated ETH and BTC option skews hit multi-month lows (BTC 25-delta risk reversal near -13%). ATM implied volatilities for BTC and ETH surged, with ATM IVs and term structures inverting. Block Scholes’ risk appetite indices and listed-expiry volatility smiles reflect heightened demand for downside protection and elevated volatility expectations. Key trading signals for traders: negative funding suggests short dominance and potential squeeze risk; inverted futures yields imply near-term bearish carry; steep put skew and higher ATM IV indicate elevated tail-risk premium. Monitor funding, open interest, short squeezes, and option skew for near-term trade signals; consider volatility hedges or reduced directional exposure until volatility and funding normalize.
Bearish
The article documents a cross-asset risk-off episode where a major precious-metals selloff transmitted to crypto, producing several convergent bearish derivatives signals. Negative perpetual funding for BTC and ETH indicates majority short positioning; short-dated futures trading at a discount to spot shows near-term bearish carry; steep negative 25-delta risk reversals and rising ATM IVs signal elevated demand for puts and higher tail-risk pricing. These indicators historically accompany further downward pressure or amplified volatility in the near term (e.g., October 2025 selloff). For traders, this translates to higher probability of continued downside or violent mean-reversion moves driven by deleveraging and short squeezes. Short-term impact: increased volatility, elevated liquidation risk, and potential continuation of downward price pressure. Long-term impact: persistent volatility until macro risk sentiment and liquidity stabilize; volatility premia and put demand may stay elevated, widening option skews. Therefore positioning should favor risk management — reduce leveraged long exposure, consider volatility hedges (buy protection or long-dated options), or tactical put-buying for defined-risk downside exposure. Monitor funding rates, futures basis, open interest, and option skew for signals of capitulation or relief rallies.