Matrixport: The cryptocurrency market approaches a critical juncture, with liquidity continuing to flow out and volatility resetting

Matrixport released a research report on platform X, which pointed out that Bitcoin recently experienced a rapid decline, with implied volatility of options soaring at one point and then partially retreating. The price of Bitcoin dropped from around $85,000 to a low near $60,000, before stabilizing around $66,000.

Meanwhile, the implied volatility for March 2026 quickly surged from just over 40% to nearly 65%, a panic high, reflecting strong demand for downside protection during the decline. Subsequently, the implied volatility fell back to around 50%, indicating that some tail risk hedges are being unwound, and short-term pressure has eased. The crypto market is approaching a critical turning point: volatility remains high, sentiment lingers at extreme lows, and market liquidity continues to flow out. Traders are gradually unwinding their crash hedges, resulting in a noticeable reduction in overall positions and a significant decline in participation. Historically, such combinations often appear before the initiation of important directional trends. The macro environment has shown improvement, but cryptocurrency prices have not followed suit significantly, and this divergence is usually difficult to sustain in the long term.