Bitcoin’s market grew markedly calmer in 2025 as institutional investors increasingly turned to derivatives to generate incremental yield from their holdings, putting sustained pressure on volatility.
The shift is visible in a steady decline in implied volatility across the bitcoin options market. Measures such as Volmex’s BVIV and Deribit’s DVOL — which track expected price swings over the next 30 days — trended lower throughout the year. Both indices began 2025 near 70% and are set to end the year around 45%, after dipping to a low near 35% in September.
That downtrend has largely been driven by institutions selling call options against spot bitcoin holdings or spot bitcoin ETFs, effectively harvesting yield during periods of muted price action. By overwriting calls, investors collect option premiums upfront in exchange for capping upside beyond a certain price level.
“We definitely saw a structural decline in BTC implied volatility as more institutional money came in and was happy to harvest yield by selling upside calls,” Imran Lakha, founder of Options Insights, said in a post on X.
Options grant buyers the right, but not the obligation, to buy or sell an asset like bitcoin at a predetermined price before a set expiration date. Call options express a bullish view, while put options are typically used to hedge downside risk. For sellers, options function much like selling lottery tickets: the seller collects a premium, and if the option expires worthless — as most do — the premium becomes profit.
Institutions with large bitcoin balances have leaned into this dynamic by selling out-of-the-money calls, where bitcoin would need a substantial rally to make the option profitable for buyers. During long stretches of range-bound trading, this strategy has provided a relatively consistent source of income.
The scale of this activity has created a persistent supply of options, pushing implied volatility lower across the curve. According to Jake Ostrovskis, head of over-the-counter trading at Wintermute, more than 12.5% of all mined bitcoin now sits in ETFs and corporate treasuries — holdings that generate no native yield.
“Since these positions don’t produce yield on their own, call overwriting emerged as the dominant flow throughout 2025, driving steady pressure on implied volatility from the supply side,” Ostrovskis said in a note to CoinDesk.
Hedged longs
Institutional participation has also reshaped the structure of the bitcoin options market, making it behave more like traditional asset classes. For much of 2025, put options — typically used for downside protection — traded at a premium to calls across both short- and long-dated maturities.
That persistent put skew marks a departure from prior years, when longer-dated options often carried a bullish call bias. Rather than signaling outright bearishness, the shift reflects the preferences of sophisticated investors who pair long exposure with hedges.
“The pressure on upside and demand for hedging, which is typical of institutional investors, drove a steady move from call skew into put skew across the entire term structure,” Lakha said. “It’s a sign that real money is long and hedged — not necessarily bearish.”
Taken together, the rise of yield-focused options strategies and widespread hedging has dampened bitcoin’s volatility, reinforcing a more mature, institutionally driven market structure as 2025 draws to a close.
