Bitcoin Bears Battle Critical Support Zone as BTC, Stock, and Gold Volatility Indices Surge

Bitcoin’s BTC$86,777.66 price is precariously hovering in the critical support zone amid a broadening surge in volatility indices across asset classes.

The leading cryptocurrency by market value has dropped nearly 2.5% to $108,000 in 24 hours. It has entered the key support zone of $107,000 to $110,000, which, if breached, would mark a significant weakening of buying pressure and expose prices to deeper losses.

BTC's annualized 30-day implied or expected volatility, gauged by Volmex's BVIV index, has climbed above 50%, retaining gains seen during last Friday's leverage flush out.

The index has risen more than 21% since bitcoin began its pullback from the Oct. 6 record high of over $124,000. This rise highlights the growing Wall Street-like dynamics in the crypto market, where volatility tends to surge during price sell-offs.

The upswing in BTC's volatility is marked by short and near-dated puts trading at 5% to 9% volatility premium to calls, reflecting heightened fears of a protracted sell-off, according to Deribit data. Put options offer insurance against potential weakness in the underlying asset. Traders commonly purchase puts to hedge their spot market holdings or to profit from an anticipated market sell-off.

Speaking of Wall Street, its very own fear gauge, the VIX index, rose 22% to 25.43 on Thursday, the highest since May 7. The index has increased 56% since last Friday.

Similarly, the CBOE gold volatility index (GVZ) jumped 20% to 32.78 on Thursday, reaching the highest level since October 2022. The yellow metal's price per ounce rose to a fresh lifetime high of $4,380 per ounce.

The concurrent rise in volatility indices across equities, gold, and cryptocurrencies underscores a broad-based risk-off mood likely driven by signs of liquidity stress in the U.S. financial system.