Bitcoin volatility, in hibernation for much of 2025, is waking up, signaling a phase of increased price fluctuations and uncertainty.
This change is evident in Volmex’s 30-day implied volatility index (BVIV), derived from options pricing. BVIV recently broke above a trendline marking a year-to-date decline from a 73% annualized rate, confirming what technical analysis aficionados would call a bullish breakout. The technical setup means that volatility could continue to increase in the coming days, implying increased turbulence in the markets.
Analysts agree with the chart’s signal, citing changes in market flows, weak liquidity and lingering macroeconomic concerns as the main reasons why volatility is expected to remain elevated in the near term.
Decrease in volatility by sellers
Long-time volatility sellers – including OG holders, miners and whales – have dampened price swings by aggressively crushing calls throughout 2025, according to Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.
This strategy, aimed at generating yield in addition to cash holdings, helped to reduce implied volatility at the start of the year. However, since the big sell-off on October 10, when bitcoin fell from nearly $120,000 to $105,000 and altcoins plunged more than 40%, these players have pulled back.
This decline means that fewer call option cancellations are weighing on implied volatility (IV). Meanwhile, traders are increasingly buying out-of-the-money positions below $100,000, pushing the IV higher, as CoinDesk reports.
“Typical sellers of volatility – large whales, OG holders, and miners – have pulled back significantly, consistent with their tendency to sell call options only in rising markets. On the other hand, demand for downside protection has increased among institutional investors as spot prices continue to fall,” Yang told CoinDesk.
“Overall, the combination of limited volume supply, increased demand for downside hedging, and a structurally weaker liquidity environment suggests that elevated volatility levels may persist in the near term,” Yang added.
Low liquidity amplifies movements
Liquidity – the market’s ability to absorb large orders without causing sudden price movements – has weakened significantly since the October 10 crash, making the price more sensitive to a few large buy and sell orders.
Indeed, some market makers reportedly suffered heavy losses during the crash, as record forced liquidations worth $20 billion spread through the market. Others, according to Yang, are said to have reduced their business activities due to concerns over automatic debt reduction (ADL) mechanisms.
With fewer liquidity providers actively bidding and thinner order books, price swings have become more pronounced, amplifying overall volatility, Yang explained.
Jeff Anderson, head of Asia at STS Digital, expressed a similar view, saying that institutional players have lowered risk limits, thereby worsening liquidity problems.
“The market has been facing low liquidity and declining volumes since the October 10 sell-off. A number of institutional players lowered risk limits and withdrew from trading as the dust settled,” said Jeff Anderson, Head of Asia at STS Digital. “This change in market structure will maintain option prices [and implied volatility] high until confidence and credit improve.
Anderson stressed, however, that the high volatility regime may not last long unless the artificial intelligence (AI) bubble bursts.
Macro instability
Macroeconomic difficulties add another dimension to risk. Griffin Ardern, head of research and options at BloFin, points to the current drama of the US government shutdown and expensive fiat liquidity as factors keeping volatility high.
Although the Senate has approved a plan to reopen the government, political uncertainty remains until the House and President approve it. Meanwhile, a lack of U.S. economic data is clouding the Fed’s policy outlook, as fears of hawkish inflation stall rate cuts. At the October meeting, inflation advocates 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 increased implied volatility, but also to continued pricing of higher tail risks and backwardation in the butterfly futures structure since October 12. »
He stressed that these risks are systemic, rooted in macroeconomic conditions rather than specific assets, adding that “the pricing of macroeconomic risks is unlikely to fall in the short term, which is the main reason why the current IV remains high,” Ardern noted.
