Bitcoin The market became much quieter in 2025 as institutions adopted derivatives linked to the leading cryptocurrency to generate additional liquidity from their idle coin holdings.
The calm is evident in the steady decline in BTC’s 30-day annualized implied volatility, as measured by Volmex’s BVIV and Deribit’s DVOL indices. These metrics indicate expectations for price volatility over the next four weeks.
Both indexes started the year at around 70% and ended the year at almost 45%, after hitting a low of 35% in September. This steady downward trend comes from institutions selling call options in addition to their cash market holdings to reap returns.
“We [definitely] “We saw a structural decline in BTC implied volume as more institutional money came in and we were happy to reap returns by selling upside calls,” Imran Lakha, founder of Options Insights, said on X.
Options are contracts giving buyers the right, but not the obligation, to buy or sell an asset like bitcoin at a fixed price and within a specified time period. Calls allow buyers to buy the asset at a predefined price, representing the bullish bet on the market, while puts allow them to sell.
Selling options is like selling lottery tickets: You collect an upfront premium as the seller, which caps your maximum profit if the option expires worthless. Most options expire worthless, favoring sellers over time.
Institutions with deep pockets holding spot BTC or Bitcoin ETFs took advantage of this setup by selling out-of-the-money calls, those higher bullish bets where BTC would need a big rally to pay off. This helped them pocket the premium received up front in the form of easy yield, especially during periods of price sluggishness.
This flood of covered call writing by institutions created a constant supply of options, thereby reducing implied volatility.
“More than 12.5% of all Bitcoin mined is now in ETFs and Treasuries. Since these holdings generate no native yield, [call] crush has become the dominant flow throughout 2025, leading to constant pressure on IV from the supply side,” Jake Ostrovskis, head of the OTC desk at Wintermute, said in a note to CoinDesk.
Covered long positions
Institutional adoption has significantly reshaped Bitcoin options trading, bringing BTC closer to the behavior of traditional markets.
For most of 2025, BTC puts, bearish bets to hedge against declines, traded at a persistent premium to calls on both short- and long-term maturities. This selling bias reversed the scenario of previous years, when longer-term options consistently had a bullish buying bias.
This change does not necessarily signal a bearish trend, but reflects an influx of sophisticated players who prefer to hedge their bullish bets.
“The upward pressure and demand for hedging, typical of institutional investors, resulted in a steady shift from buy bias to sell bias, which spread across the term structure. A sign that real money is long and hedged. Not necessarily bearish,” Lakha added.
