Bitcoins volatility, dormant for most of 2025, is awakening, signaling a phase of increased price volatility and uncertainty.
The shift is evident in Volmex’s 30-day implied volatility index (BVIV), derived from option prices. BVIV recently surged past a trendline that characterizes its year-to-date decline of 73% year-on-year, confirming what technical analysis followers would call a bullish breakout. The technical pattern means that volatility may continue to rise in the coming days, meaning increased market turbulence.
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 high in the near term.
Declining volatility sellers
Long volatility sellers — including OG holders, miners and whales — had dampened price swings by aggressively overwriting calls throughout 2025, according to Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.
This strategy, aimed at generating returns on top of spot holdings, helped drive down implied volatility earlier this year. But since the sharp selloff on October 10, when bitcoin fell from nearly $120,000 to $105,000 and altcoins plunged more than 40%, those players have pulled back.
The pullback means fewer call overrides weigh on implied volatility (IV). Meanwhile, traders are increasingly taking out-of-the-money puts below $100,000, pushing IV higher, as reported by CoinDesk.
“The typical volatility sellers — big whales, OG holders and miners — have notably retreated, in line with their tendency to only sell call options in rising markets. On the other hand, demand for downside put protection has increased among institutional investors as spot prices continue to slide lower,” Yang told CoinDesk.
“Overall, the combination of limited volatility supply, increased downside hedging demand and a structurally weaker liquidity environment suggest that elevated volatility levels may persist in the near term,” Yang added.
Thin liquidity-enhancing moves
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.
That’s because some market makers reportedly took big losses during the crash, as record liquidations worth $20 billion poured through the market. Others, according to Yang, have reportedly curtailed their trading activity due to concerns over automatic deleveraging (ADL) mechanisms.
With fewer liquidity providers actively quoting prices and order books thinning, price swings have become more pronounced, amplifying overall volatility, Yang explained.
Jeff Anderson, head of Asia at STS Digital, echoed a similar sentiment, saying institutional players have lowered risk limits, adding to liquidity concerns.
“The market has struggled with poor liquidity and lower volumes since the sell-off on October 10. A number of institutional players have lowered 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 hold option prices [and implied volatility] increased until sentiment and credit improve.”
However, Anderson stressed that the high-volatility regime may not last long unless the artificial intelligence (AI) bubble bursts.
Macro jitter
Macro headwinds add another dimension of risk. Griffin Ardern, head of BloFin Research and Options, points to the ongoing US government shutdown drama and expensive 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 sign it off. Meanwhile, missing US economic data clouds the Fed’s policy outlook as hawkish inflation worries rate cuts. During the October meeting, inflation hawks at the central bank pushed for a pause in rate cuts, and the split may not stop soon.
Ardern noted, “The pricing of macroeconomic and liquidity risks has led not only to increased implied volatility, but also to ongoing pricing of higher tail risks and reversals in the butterfly’s term structure since October 12.”
He 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 decrease in the near term, which is the main reason why the current IV remains high,” Ardern noted.
