Matrixport: Crypto Market Nears Critical Juncture, Liquidity Continues to Outflow, Volatility Resets

Odaily News Matrixport posted on platform X, pointing out: Bitcoin recently experienced a rapid decline, with option implied volatility spiking and then partially retracing. The price of Bitcoin dropped from around $85,000 to lows near $60,000, before stabilizing around $66,000. Meanwhile, the implied volatility for March 2026 expiry surged from just over 40% to a panic-driven high near 65%, reflecting strong demand for downside protection during the sell-off. Subsequently, implied volatility has retraced to around 50%, indicating that some tail-risk hedging is being unwound and short-term pressure has eased somewhat.

The crypto market is approaching a critical inflection point: volatility remains elevated, sentiment hovers at extreme lows, and market liquidity continues to outflow. Traders are gradually unwinding crash hedges, with overall positioning becoming significantly lighter and participation markedly declining. Historically, this combination of characteristics has often preceded the start of significant directional moves. While the macro environment has shown improvement, crypto asset prices have not yet followed suit significantly. Such divergence is typically difficult to sustain over the long term.