The bitcoin market grew much calmer in 2025 as institutions embraced derivatives tied to the leading cryptocurrency to generate extra cash from their idle coin holdings.
The calmness is evident in the consistent decline in BTC’s annualized 30-day implied volatility, as measured by Volmex’s BVIV and Deribit’s DVOL indexes. These metrics indicate expectations for price volatility over the next four weeks.
Both indices began the year at around 70% and are ending the year near 45%, having hit a low of 35% in September. This steady downtrend stems from institutions selling call options on top of their spot market holdings to harvest yield.
“We [definitely] saw a structural decline in BTC implied vol as more institutional money came in and was happy to harvest yield 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 set price by a deadline. Calls let buyers purchase the asset at a preset price, representing the bullish bet on the market, while puts let them sell.
Selling options resembles vending lottery tickets – you collect an upfront premium as the seller, which caps your max profit if the option expires worthless. Most options do expire worthless, favoring sellers over time.
Institutions with deep pockets holding BTC or spot bitcoin ETFs have been cashing in on this setup by selling out-of-the-money calls, those higher-strike bullish bets where BTC would need a big rally to pay off. It helped them pocket the premium received upfront as an easy yield, especially during periods of dull price action.
This flood of covered call selling by institutions has created a steady supply of options, driving down implied volatility.
“More than 12.5% of all mined Bitcoin now sits in ETFs + treasuries. Since these holdings generate no native yield, [call] overwriting emerged as the dominant flow throughout 2025, driving steady pressure on IV from the supply side,” Jake Ostrovskis, head of over-the-counter desk at Wintermute, said in a note to CoinDesk.
Hedged longs
Institutional adoption has reshaped bitcoin options trading in a big way, pulling BTC closer to how traditional markets behave.
For most of 2025, BTC puts, bearish bets for hedging downside, traded at a persistent premium to calls across short- and long-term expiries. This put bias has flipped the script from prior years, when longer-dated options consistently carried bullish call skew.
The shift doesn’t necessarily signal bearish vibes but reflects an influx of sophisticated players who prefer to hedge their bullish bets.
“The pressure on upside and demand for hedging, which is typical of institutional investors, saw a steady move from call skew into put skew, which propagated across the entire term structure. A sign that real money is long and hedged. Not necessarily bearish,” Lakha added.
