April 14, 2026
Why does BTC’s crash protection appear cheap?
Despite multiple 50-80% drawdowns since 2020, BTC’s 25-delta put wing, a standard measure of crash insurance cost, has averaged just ~5% above at the money (ATM) implied volatility (IV). On ~11% of all days, the premium disappears entirely. In 2024, that figure reached 29%.
One possible driver is persistent vol selling. Out of the money (OTM) puts carry the richest IV on the surface, and Chart 1 shows the 25Δ put’s vol risk premium consistently exceeds the ATM vol risk premium. That extra carry attracts systematic sellers, increasingly tied to ETF-related flows, whose supply compresses the put wing even as tail risk remains.
For context, Chart 2 shows S&P 500 crash protection virtually never gets this cheap, while BTC’s skew crosses zero ~30 times per year.
From such low starting levels, it can be theorized that a major drawdown could trigger a meaningful repricing.
Important Disclosure: ParaFi Signals are provided solely for informational purposes and are not intended to be, nor should it be construed as, financial, legal, tax or investment advice. The information provided above should not be considered a recommendation to purchase or sell any particular security.
Content is as of the date posted and subject to change without notice. Certain information has been obtained from third-party sources, including from portfolio investments of investment vehicles managed by ParaFi. ParaFi makes no representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information made herein or through a ParaFi social media account and any liability therefore is expressly disclaimed. ParaFi makes no representations about the enduring accuracy of information, or its appropriateness for a given scenario, and expressly disclaims any obligation to update any information or statement.
Unless otherwise noted, all figures and calculations are estimated and rounded for ease of reference. Figures and calculations provided are for informational purposes only, computed by the speaker (or a third-party, if so disclosed), and have not been audited by any independent third party. You should independently evaluate and judge the matters referred to therein.