The market is pricing Bitcoin’s downside risk much lower than historical precedents would suggest.

Although Bitcoin has undergone multiple 50–80% corrections since 2020, the cost of protective options (the 25-delta put wing) is only about 5% higher than at-the-money implied volatility (ATM IV). In fact, for nearly 29% of 2024, the market priced in almost no premium for downside risk.
One contributing factor is the continuous selling of volatility—particularly from strategies linked to spot ETFs—which generates a supply of put options and keeps hedging costs low.
In contrast, the S&P 500 almost consistently maintains a premium for downside protection, whereas Bitcoin frequently trades with very low pricing for tail risk.
This does not necessarily mean a Bitcoin correction is less likely; rather, it may indicate market overconfidence. Should a correction occur, put options would likely be repriced rapidly, driving a surge in market-wide volatility.