Bitcoin Volatility, which was in hibernation for much of 2025, is awakening, signaling a phase of greater price swings and uncertainty.
The change is evident in Volmex’s 30-day implied volatility index (BVIV), derived from the options price. BVIV recently surpassed a trend line characterizing the year-to-date decline from an annualized 73%, confirming what technical analysis aficionados would call a bullish breakout. The technical pattern means that volatility could continue to increase in the coming days, implying further turbulence in the market.
Analysts agree with the chart signal, citing changes in market flows, weaker liquidity and ongoing macroeconomic concerns as key reasons why volatility is likely to remain elevated in the near term.
Sellers with decreasing volatility
Longtime volatility sellers, including OG holders, miners and whales, had been dampening price swings by aggressively overwriting calls throughout 2025, according to Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.
This strategy, intended to generate returns on top of spot holdings, helped reduce implied volatility earlier in the year. However, since the sharp sell-off on October 10, when bitcoin fell from nearly $120,000 to $105,000 and altcoins plunged more than 40%, these players have retreated.
The pullback means fewer call option overwrites are weighing on implied volatility (IV). Meanwhile, traders are increasingly buying out-of-the-money puts below $100,000, pushing up the IV, as CoinDesk reported.
“Typical volatility sellers (big whales, OG holders, and miners) have pulled back noticeably, consistent with their tendency to sell call options only in rising markets. On the other hand, demand for short-sale protection has increased among institutional investors as spot prices continue to decline,” Yang told CoinDesk.
“Overall, the combination of limited volatility supply, increased downside hedging demand, and a structurally weaker liquidity environment suggests that elevated levels of volatility could persist in the near term,” Yang added.
Amplifying movements of low liquidity
Liquidity (the market’s ability to absorb large orders without causing sharp price movements) has weakened significantly since the October 10 crash, making the price more sensitive to a few large buy and sell orders.
This is because some market makers reportedly suffered huge losses during the crisis as record forced liquidations worth $20 billion cascaded through the market. Others, according to Yang, have reportedly reduced their trading activity amid concerns over automatic deleveraging (ADL) mechanisms.
With fewer liquidity providers actively quoting prices and order books becoming thinner, price swings have become more pronounced, amplifying overall volatility, Yang explained.
Jeff Anderson, head of Asia at STS Digital, expressed a similar view, saying institutional players have lowered risk limits, adding to liquidity issues.
“The market has been struggling with poor liquidity and lower volumes since the October 10 sell-off. Several institutional players have reduced risk limits and withdrawn from trading as the dust settles. Jeff Anderson, head of Asia at STS Digital,” said Anderson. “This change in market structure will keep option prices [and implied volatility] raised until confidence and credit improve.
Anderson, however, emphasized that the high volatility regime may not last long unless the artificial intelligence (AI) bubble bursts.
Macro nervousness
Macroeconomic headwinds add another dimension of risk. Griffin Ardern, Head of Research and Options at BloFin, points to the ongoing drama of the US government shutdown and costly fiat liquidity as factors keeping volatility elevated.
Although the Senate approved a plan to reopen the government, political uncertainty remains until the House and the President approve it. Meanwhile, a lack of US economic data clouds the Federal Reserve’s policy outlook as aggressive inflation fears halting rate cuts. During the October meeting, inflation hawks at the central bank pushed for a pause on rate cuts, and the split may not end anytime soon.
Ardern said: “The pricing of macroeconomic and liquidity risks has led not only to higher implied volatility, but also to continued pricing of higher tail risks and a pullback in the butterfly term structure since 12 October.”
She emphasized that these risks are systemic, rooted in macro conditions rather than specific assets, adding that “risks at the macro level are unlikely to be priced down in the near term, which is the main reason why the current IV remains high,” Ardern said.
