Bitcoin volatility spiked sharply during Thursday’s sell-off as traders rushed to seek downside protection.
Deribit’s bitcoin volatility index, known as DVOL, jumped sharply, rising from around 37 to over 44. DVOL is cryptocurrencies’ closest equivalent to Wall Street’s VIX, a fear gauge, which tracks how much price movement traders expect over the next 30 days based on the price of options.
When the DVOL rises, it means traders are paying for protection, options become more expensive, and fear increases.
Options are derivative contracts that give the buyer the right to buy or sell the underlying asset at a predetermined price at a later date. A call option gives the right to buy and represents a bullish bet on the market. A put option offers protection against price declines.
The increase in volatility came as markets digested renewed macroeconomic uncertainty, including rising government shutdown risks and new political noise around the Federal Reserve’s future leadership. Volatility also increased in traditional markets, with the VIX rising in parallel, reinforcing the sense of broader risk aversion rather than a crypto-only event.
Despite the increase, bitcoin’s implied volatility remains far from extreme when considered in a historical context.
Data from Deribit shows bitcoin’s rank IV at 36, meaning current implied volatility (a market-driven metric that represents the expected future volatility of an asset’s price) is only modestly above its lowest levels from last year. The IV percentile sits near 50, suggesting that bitcoin volatility has been below current levels about half the time in the past 12 months.
In simple terms, volatility increased rapidly, but has not yet reached its limit.
That’s important for merchants. A rising DVOL indicates that options markets expect larger price swings in the future, even if spot prices appear to stabilize. The IV rank and IV percentile help traders judge whether options are cheap or expensive relative to recent history, which can influence decisions about hedging, leverage, and risk exposure.
For now, options markets are signaling caution rather than panic.
Still, coupled with more than $1.7 billion in liquidations and heavy long positions wiped out on exchanges, the increase in volatility shows how fragile the positioning had become. When prices fell, forced sales did the rest.
The message from derivatives markets is simple. Bitcoin is no longer calm. And traders are bracing for more turbulence ahead, with some targeting the $70,000 mark in the coming weeks.
