Bitcoin’s Volatility, in hibernation for about 2025, woke up, signaling a period of increased price swings and uncertainty.
The shift is evident in Volmex’s 30-day implied Volatility Index (BVIV), which is derived from options pricing. BVIV has recently crossed a trendline showing a year-to-date decline of an annual 73%, confirming what aficionados of technical analysis would call a bullish breakout. The technical pattern means volatility may continue to rise in the days ahead, indicating increased market volatility.
Analysts agree with the chart’s signal, citing shifts in market flows, weaker liquidity, and persistent macroeconomic concerns as key reasons why volatility is likely to remain elevated in the near term.
Sellers reduce volatility
Long sellers of volatility—including OG holders, miners, and whales—are subverting price swings by aggressively overwriting calls throughout 2025, according to Jimmy Yang, co-founder of Institutional Liquidity Provider Orbit Markets.
This strategy, which aims to generate yield at the top of the area’s market holdings, helped drive volatility that indicated earlier in the year. However, since the sharp October 10 sell-off, when Bitcoin dropped from nearly $120,000 to $105,000 and altcoins fell by more than 40%, these players retreated.
The contraction means fewer call overwrites weigh on the implied volatility (IV). Meanwhile, traders are increasingly snapping up out-of-the-money puts below $100,000, pushing IV higher, as reported by Coindesk.
“The usual sellers of volatility – Big whales, OG Holders and Miners – have noticeably turned their backs, in line with their tendency to sell call options only in rising markets. On the other hand, the demand for downside protection has been selected among institutional investors as prices continue to drift lower,” Yang told Coindesk.
“Overall, the combination of limited Vol supply, increased hedging demand, and a structurally weaker liquidity environment suggests that rising volatility levels may continue in the near term,” Yang added.
Thin liquid moving in motion
Liquidity – the market’s ability to absorb large orders without causing sharp price movements – has weakened significantly since the Oct. 10 crash, making price more sensitive to some large buy and sell orders.
That’s because some market makers reportedly took heavy losses during the crash as the record forced Liquids worth $ 20 billion Cascaded through the market. Others, according to Yang, have reportedly curtailed their trading activity amid concerns Automatic Deleveraging (ADL) Mechanisms.
With fewer liquidity providers actively quoting prices and order books growing thinner, price swings have become more pronounced, fueling overall volatility, Jeff Anderson, head of Asia at STS Digital, told Coindesk.
“The market has been struggling with poor liquidity and lower volume since the 10-October sell-off. A number of institutional players have lowered risk limits and pulled out of trading as the dust settled. Jeff Anderson, head of Asia at Sts Digital,” said Anderson. “This change in market structure will keep option prices (and implied volatility) elevated until sentiment and credit improve.”
However, Anderson emphasizes that the high volatility regime may not last long unless the artificial bubbles pop.
Macro jitters
Macro headwinds add another dimension of risk. Griffin Ardern, head of Blofin Research and Options, points to the ongoing drama of the US government shutdown and costly fiat liquidity while maintaining volatility.
Although the Senate approved a plan to reopen the government, political uncertainty remains until the House and the President sign up. Meanwhile, missing US economic data is weighing on the Fed’s policy outlook, as hawkish inflation worries stall rate cuts. During the October meeting, inflation hawks at the central bank pushed for a pause in rate cuts, and the division may not end soon.
Ardern noted, “the pricing of macroeconomic and liquidity risks has led not only to an increase in implied volatility but also to continued pricing of higher tail risks and backwardation in the butterfly term structure since October 12.”
She emphasized that these risks are systemic, rooted in macro conditions rather than specific assets, adding that, “the pricing of macro-level risks is unlikely to fall in the short term, which is the main reason why the current IV remains high,” Ardern said.
