The options market is cooling down, but the demand for downside protection remains strong. What does the decline in implied volatility reveal?

【Crypto World】Recently, there has been an interesting phenomenon in on-chain data. Activity in the options market has noticeably cooled down, with reduced capital inflows, indicating that everyone’s enthusiasm for a rally is not as high. However, the demand for put options remains, and the market has not completely let its guard down.

Implied Volatility (IV) has generally declined, with the IV of at-the-money options across various maturities around 44%, down more than 10 volatility points from recent highs. This reflects a waning interest in short-term hedging and leveraged long positions.

Even more interesting is that the 25D skew remains positive. Simply put, put options are more expensive than call options — in market pricing, the demand for downside protection still exceeds upside leverage. This usually indicates that traders are still preparing for potential risks. Strangely, this skew trend is somewhat different from the typical patterns seen before a breakout, revealing the complexity of market sentiment.