📰 News Summary


After the crash (the recent sharp decline that led to massive liquidations of over $7 billion), many traders —especially institutional or large traders— are looking for 'hedges' to protect themselves from further losses if the market falls again.


This has created a 'rush' (an avalanche) of demand for financial products such as:


  • Put options

  • Short futures

  • Perpetual swaps with short positions

  • Volatility derivatives, such as volatility calls or variance swaps


These instruments allow for portfolio protection or even betting on a new market drop without having to sell assets directly.


#MarketRebound , #HedgingStrategy

🧩 Explanation of key terms


1. 🛡️ Hedging


It is a strategy to reduce or eliminate the risk of loss in an investment.


Example:



If you have 10 BTC and fear they will drop in price, you can open a short position in BTC futures.

If the price drops, your BTC are worth less, but the short position gains value → the loss is 'offset'.


Goal: Not to gain more, but to protect against a drop.


#SHORT📉

2. 📉 Options


A put option gives the right (not the obligation) to sell BTC at a specific price (strike price) on a future date.


  • If the price falls below the strike, the option increases in value.

  • Many traders buy puts as insurance against drops.


Example:



You buy a BTC put with a strike of $100,000.

If BTC drops to $90,000, that option appreciates significantly, offsetting your losses.


#Derivatives

3. 📊 Derivatives


Financial instruments whose value 'derives' from the price of an underlying asset (BTC, ETH, etc.).


Main types used in crypto:


  • Futures: contract to buy/sell on a future date.

  • Perpetuals (swaps): similar to futures, but without an expiration date.

  • Options: as explained before.

  • Volatility derivatives: more complex products used to speculate or hedge against market volatility levels.


$BTC

4. ⚡ Rush or Coverage Fever


When a crash occurs, traders rush to cover themselves because:



  • There is fear of another drop.

  • Perceived risk increases.

  • Option prices (implied volatility) rise.


This is called a 'rush to hedge' or 'rush for protection'.


The outcome:


  • Option premiums rise.

  • The volume in derivatives skyrockets.

  • Exchanges (like Deribit, Binance Futures, OKX) report spikes in 'open interest' in puts.


#futures

🔍 What does this mean for the crypto market


  1. Increase in implied volatility (IV) → options become more expensive.

  2. Demand for puts → shows fear or caution among major players.

  3. Can generate 'short squeezes' later on, if the market rebounds and shorts must close positions quickly.

  4. Psychological indicator → many hedges = fear, but it can also signal the end of a panic (capitulation).