$2.1 billion options settle on Friday, ETH volatility drops to extremely low levels. Why are institutions rushing to position for bearish hedges?

The bulk delivery is approaching, yet market volatility is diverging. According to the latest news, approximately $2.1 billion worth of BTC and ETH options will settle this Friday (January 24), but the current market presents an interesting contrast: BTC implied volatility (IV) is at 42%, while ETH IV is surprisingly only 56% but at an extremely low level. Even more noteworthy is that funds are increasingly deploying bearish hedging strategies—what market signals does this reveal?

The Paradox of Delivery Scale and Volatility

$2.1 billion in delivery approaching, the market has already priced it in

This Friday’s options settlement of $2.1 billion is a significant milestone. However, from a volatility perspective, the market seems to have priced in this event in advance.

ETH’s volatility has dropped to the lowest 1.1% percentile in the past year, indicating that the market’s recent volatility expectations for ETH have been pushed to an extremely low level. However, such ultra-low volatility often contains contrarian opportunities.

Skew Indicator Reflects Market Sentiment Shift

Over the past week, the 25-Delta Skew for BTC and ETH has generally trended negative, with the most pronounced decline over short-term (7-day/30-day) periods. This signal is quite clear:

• Funds are predominantly buying puts
• Short-term downside hedging demand is surging
• Risk appetite is waning
• Market anticipates increased volatility

A negative skew essentially reflects that market participants are actively purchasing downside protection with real capital—this is not just sentiment, but actual capital allocation.

Institutional Strategies Revealed by Large Trades

Put spreads are becoming mainstream

In the past 24 hours, a large BTC trade involved buying 88k/90k puts (30JAN26-P), totaling about 1,115 BTC, with a net premium income of approximately $730,000. This structure is quite typical:

• Buying 88k puts (floor price)
• Selling 90k puts (risk cap)
• Using premium income to reduce overall cost
• Suitable for traders expecting short-term downside but wanting to control costs

The scale of 1,115 BTC indicates this is not retail activity but institutional risk management.

ETH’s “Long Volatility” Strategy

More interestingly, a large ETH trade involved a long volatility wide straddle: buying 2800-P & 3200-C, totaling about 5,000 ETH, with a net premium expenditure of $2.03 million.

Implications of this strategy:

• Simultaneously buying puts at $2800 and calls at $3200
• A classic “long volatility” approach
• Paying $2.03 million in premiums to benefit from rising volatility
• When volatility is at an extremely low level, this strategy’s cost-effectiveness increases

Price Trends and Options Market Correlation

Current BTC price is $88,345.72, down 2.90% in 24 hours and 7.04% over 7 days. While the decline isn’t large, it aligns with the bearish bias in the options market. Institutions have already hedged against downside risks through options in advance.

Summary

The $2.1 billion delivery scale is indeed noteworthy, but even more important is how the market is pricing this event. ETH’s volatility is at an extremely low level, while funds are deploying bearish hedges and long volatility strategies—indicating that in a low-volatility environment, the market is seeking strategic value. This isn’t panic; it’s institutions using real trading actions to express a rational assessment of near-term risks. In the coming days, changes in volatility before and after the delivery, along with actual fund movements, will be key windows into market sentiment shifts.