Key Highlights
- The Bybit and Block Scholes report notes that Bitcoin’s February 5 flash crash triggered the most severe derivatives positioning since the 2022 FTX collapse.
- During the period, ETH fell below $2,000, SOL neared $70 (down >70% from January highs), and major altcoins like XRP and BNB dropped over 60% from peaks.\
- The current market sentiment remains in “extreme fear,” decoupled from macro events, making a near-term rebound for major tokens very challenging.
The cryptocurrency market has experienced significant volatility in the past few months. The broader crypto market lost over $1.2 trillion in market capitalization during the period, with surging short-dated implied volatility and heightened demand for downside protection across major tokens.
A recent joint report by Bybit and Block Scholes found that BTC’s brief drop to $60,000 on February 5, followed by a recovery above $70,000 by Friday, had a dramatic impact on derivatives markets.
Bybit, one of the largest cryptocurrency exchanges by trading volume, highlighted that BTC’s flash crash to $60,000 last week triggered the most extreme derivatives positioning since the November 2022 FTX collapse.
Following Bitcoin’s dip, altcoins also bore the brunt of the selloff, with ETH falling below $2,000 and SOL price dropping near $70, down more than 70% from January highs. Coinciding with the drop, various large-cap tokens, including ETH, XRP, and BNB, are also down over 60% from their peaks.
Extreme derivatives positioning since 2022
The February 5 market crash briefly pushed Bitcoin to $60,000 and triggered the most extreme derivatives positioning since the November 2022 FTX collapse. Short-dated implied volatility for BTC and ETH surged to multi-year highs, matching levels last seen during that downturn as traders aggressively sought downside protection.
According to the report, at-the-money implied volatility spiked sharply, with BTC’s 7-day readings exceeding 100%, reflecting intense fear and extremely high premiums paid for put options. ETH options followed suit, reaching their most elevated short-dated volatility since the 2022 bear market. While not as panicked as 2022, the dip below $60,000 for BTC and sub-$1,800 for ETH was enough to significantly increase the cost of hedging.
Moreover, funding rates across most large-cap altcoins turned deeply negative, signaling strong bearish conviction among perpetual shorts, most notably SOL’s 7-day average dropping to -0.04%, its lowest since October 2025.
Although Bitcoin’s funding rates stayed relatively subdued, indicating the selloff was driven mainly by spot liquidations rather than leveraged futures piling in.
Bitcoin dominance remains stable
Unlike previous downturns, BTC dominance remained stable throughout the drawdown. Capital appeared to have flowed out of the broader crypto market proportionally rather than rotating into BTC as a safe haven.
However, altcoin dominance has continued its decline from approximately 36% in October to around 30%, highlighting widespread risk-off sentiment across the crypto sector rather than a flight to quality within digital assets.
“Cryptos have largely shrugged off macro events, as sentiment gauges continue to wallow in ‘extreme fear’,” said Han Tan, Chief Market Analyst at Bybit Learn. “With crypto derivatives recently displaying its most extreme positioning since 2022, it’s likely a gargantuan ask for major tokens to stage a sustained near-term rebound in this present environment.”
Also read: South Korean Police Loses 22 Bitcoin From Custody: Phishing or Theft?
