Crypto markets experienced renewed turbulence this week following the announcement of Kevin Warsh as President Trump’s pick for Federal Reserve Chair. Traders quickly repriced expectations for U.S. monetary policy, sending the dollar higher and sparking broad declines across digital assets.
Over the past 24 hours, the total crypto market cap fell roughly 4.7%, with Bitcoin down over 5% year-to-date at around $82,000, more than 30% below its October 6, 2025, all-time high of $126,100. Ethereum dropped nearly 8%, trading below the key $3,000 level at $2,700.
— Bybit (@Bybit_Official) February 3, 2026
Short-Term volatility spikes while long-term stays muted
The sharp sell-off pushed short-term options volatility higher, reflecting traders’ immediate concerns. One-week at-the-money implied volatility jumped to approximately 46% for Bitcoin and 58% for Ethereum. However, longer-dated options did not show the same surge, suggesting the market currently anticipates near-term uncertainty without expecting prolonged turbulence. Analysts note that this behaviour is unusual following a drawdown of this magnitude, indicating that traders remain cautious in the short term but have yet to significantly adjust their longer-term hedges.
Trading participation remains low despite market moves
Despite the sharp price moves, derivatives markets have shown limited engagement. Open interest in perpetual futures contracts remains below levels seen before the October 10, 2025, liquidation event, and daily trading volumes are also depressed compared to earlier quarters. Historically, high realized volatility coincides with increased trading activity, but current data shows a lack of retail participation, which may be tempering extreme swings in longer-term volatility measures.
As investors navigate these developments, the crypto market remains sensitive to macroeconomic signals, particularly expectations for Fed policy. While short-term traders are reacting swiftly, broader market engagement remains subdued, suggesting cautious optimism as participants weigh both regulatory and economic uncertainty.
Notably, the crypto market experienced notable volatility this week as a large number of Bitcoin (BTC) and Ethereum (ETH) options contracts expired, according to Geeks.live.
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