Key Takeaways
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- Bitcoin dropped as much as 7.6% on Friday, heading for its worst month since the 2022 Terra/FTX collapse.
- Spot selling from ETFs, dormant wallets, and fading momentum demand is driving the slump, with options hedging magnifying volatility.
- Dealers are “short gamma” around key levels like $85,000, forcing them to sell into declines and intensifying price swings.
- Forced liquidations in perpetual futures and shrinking ETF inflows are weakening market depth and adding to downward pressure.
What Happened?
Bitcoin fell as much as 7.6% to $80,553 on Friday, extending a monthlong decline that has erased nearly 25% of its value. The downturn has been fueled primarily by heavy spot selling—ETF redemptions, long-dormant wallets moving coins, and momentum traders stepping aside. As prices broke through major options strike levels like $85,000, market makers were forced to hedge aggressively, selling more Bitcoin to stay neutral. This “short gamma” dynamic accelerated the drop before stabilizing slightly near $80,000, where hedging flows begin to flip in the opposite direction.
Why It Matters?
The selloff highlights how thin and fragile crypto liquidity has become. Options market structure—usually a secondary force—is now amplifying routine selling because dealers must chase the market lower when key levels break. Meanwhile, perpetual futures traders are being liquidated as losing long positions trigger automatic sell orders, deepening the decline. Outflows from major Bitcoin ETFs have removed an important source of passive demand that earlier this year absorbed volatility. Together, these pressures create an environment where relatively small sell impulses lead to exaggerated price movements, increasing systemic risk for leveraged traders, market makers, and crypto-treasury firms.
What’s Next?
All attention is now on the $80,000 level. A clean break lower could trigger stabilizing flows as dealers shift into “long gamma” and become net buyers to maintain hedges. But with momentum sellers still active and futures liquidations ongoing, any bounce may be brief without renewed spot demand. ETF flows will also be a key signal: continued outflows would indicate further structural weakness, while stabilization could provide a floor. Market participants should expect elevated volatility until liquidity rebuilds and options positioning resets around new support levels.
