The Bitcoin market became notably steadier in 2025 as institutions adopted derivatives linked to the premier cryptocurrency to generate additional revenue from their inactive coin reserves.
This steadiness is reflected in the consistent decrease of BTC’s annualized 30-day implied volatility, as indicated by Volmex’s BVIV and Deribit’s DVOL indices. These figures represent anticipated price volatility for the upcoming four weeks.
Both indices commenced the year at approximately 70% and concluded the year close to 45%, touching a low of 35% in September. This ongoing descent is a result of institutions offloading call options atop their spot market holdings to reap yield.
“We [definitely] observed a structural decline in BTC implied volatility as more institutional funds entered the market willing to harvest yield by selling upside calls,” Imran Lakha, founder of Options Insights, stated on X.
Options are contracts that grant buyers the right, but not the obligation, to purchase or sell an asset like Bitcoin at a predetermined price by a set date. Calls enable buyers to acquire the asset at a defined price, representing an optimistic stance on the market, while puts allow for selling.
Selling options resembles offering lottery tickets – you collect an upfront premium as the seller, which limits your maximum profit if the option expires without value. Most options indeed expire worthless, thus favoring sellers in the long run.
Institutions with significant capital holding BTC or spot Bitcoin ETFs have capitalized on this arrangement by selling out-of-the-money calls, which are higher-strike bullish wagers necessitating a substantial Bitcoin rally to yield profits. This strategy has enabled them to pocket the upfront premium as an effortless return, especially during periods of subdued price movements.
This surge in covered call selling by institutions has established a steady flow of options, thereby suppressing implied volatility.
“More than 12.5% of all mined Bitcoin currently resides in ETFs and treasuries. Since these assets yield no inherent return, [call] overwriting has become the predominant trend throughout 2025, generating consistent downward pressure on implied volatility from the supply aspect,” Jake Ostrovskis, head of the over-the-counter desk at Wintermute, remarked in correspondence with CoinDesk.
Hedged longs
Institutional engagement has significantly transformed Bitcoin options trading, aligning BTC more closely with conventional market dynamics.
For the majority of 2025, BTC puts, serving as bearish protections against downturns, consistently traded at a premium to calls across both short- and long-term expirations. This put bias has altered the narrative from previous years when longer-term options invariably presented a bullish call skew.
This change doesn’t necessarily indicate negative sentiment but illustrates an influx of sophisticated market players who prefer to hedge their bullish positions.
“The pressure on upward movement and the need for hedging, typical of institutional investors, led to a steady transition from call skew to put skew, which extended across the entire term structure. A clear indication that genuine funds are long and hedged. Not necessarily bearish,” Lakha remarked.
