Bitcoin Markets have become calmer in 2025 as institutions adopt derivatives tied to leading cryptocurrencies to generate additional cash from their idle token holdings.
This calm can be seen in the continued decline in BTC’s annualized 30-day implied volatility, as measured by Volmex’s BVIV and Deribit’s DVOL index. These indicators indicate expectations for price movements over the next four weeks.
Both indexes started the year with gains of about 70% and ended the year with gains of nearly 45%, hitting a low of 35% in September. This steady downward trend stems from institutions selling call options on top of cash market holdings for yield.
“us [definitely] Bitcoin’s implied volatility has seen a structural decline as more institutional money comes in and is happy to reap the gains by selling call options. Imran Lakha, founder of Options Insights, said on X.
Options are contracts that give the buyer the right (but not the obligation) to buy or sell an asset like Bitcoin at a set price by a deadline. Call options let buyers buy an asset at a preset price, representing a bullish bet on the market, while puts let them sell.
Selling options is similar to selling lottery tickets – you receive an upfront payment as the seller, which limits your maximum profit if the option expires worthless. Most options do expire worthless, which works to the seller’s advantage over time.
Deep-pocketed institutions holding BTC or spot Bitcoin ETFs have been profiting from selling out-of-the-money call options, which are bullish bets with a higher execution rate that BTC would need to rise significantly to pay off. It helps them pocket the premium they receive up front as easy gains, especially during periods of lackluster price action.
Heavy institutional selling of covered calls has created a steady supply of options, driving down implied volatility.
“Over 12.5% of all Bitcoin currently mined is invested in ETFs + US Treasuries. Since these assets do not generate native returns, [call] Overlays become the dominant process throughout 2025, putting continued pressure on IV from the supply side,” Jake Ostrovskis, head of Wintermute’s OTC desk, said in a note to CoinDesk.
Hedging the long position
Institutional adoption has largely reshaped Bitcoin options trading, bringing Bitcoin closer to the way traditional markets behave.
For much of 2025, Bitcoin puts (bearish bets that hedge downside risk) have continued to trade at a premium to both short-term and long-term expiration call options. This put bias is a reversal from previous years, when longer-dated options consistently carried a bullish call bias.
This shift does not necessarily signal bearish sentiment, but rather reflects the growing preference among sophisticated investors to hedge their bullish bets.
“Upward pressure and hedging demand are typical of institutional investors, with a steady shift from a bullish bias to a bearish bias that propagates throughout the term structure. This suggests that real money is long and hedged. Not necessarily bearish,” Raka added.
