What to know:
- In 2025, the bitcoin market experienced reduced volatility as institutions increasingly used derivatives to generate yield from idle holdings.
- The annualized 30-day implied volatility for bitcoin decreased from around 70% to 45% due to institutions selling covered calls.
- Preference for hedging strategies have led to a persistent premium on bearish put options over calls.
The bitcoin market, once a tempest of wild swings, settled into a lazy river of calm in 2025. Institutions, those slick sharks in the crypto sea 🐳, found a way to milk their BTC hoards for extra cash-derivatives, of course. No more rollercoaster rides, just a slow drift with a few strategically placed floaties.
Volatility, that old frenemy, took a seat and sipped a lukewarm latte. The Volmex BVIV and Deribit DVOL indexes, which track the market’s twitchy nerves, started the year sweating bullets at 70%, then cooled to a relaxed 45% by year’s end. September even saw them dip to 35%, because why not? Institutions were busy selling call options like they were peddling discount lemonade stands-harvesting yield, one covered call at a time.
“We saw a structural decline in BTC implied vol,” said Imran Lakha, founder of Options Insights, probably while sipping a margarita. “Institutional money just wanted to sell upside calls and collect premiums like they were coupons for free pizza.”
Options, those magical contracts, are like crypto’s version of a rigged carnival game. Sellers collect a shiny token (premium) upfront, hoping the buyer’s hopes and dreams expire worthless. Most do. Institutions, with wallets deeper than a gold mine, cashed in by selling out-of-the-money calls-those “I’ll win the lottery” bets-pocketing premiums like they were handing out participation trophies at a toddler’s soccer match.
This flood of covered call selling turned the market into a well-oiled hedge fund, with IV (implied volatility) getting whacked down like a gnat at a picnic. “Over 12.5% of mined Bitcoin now sits in ETFs + treasuries,” said Jake Ostrovskis of Wintermute. “No yield there, so call overwriting became the default move in 2025. IV? It’s been on a steady diet of sad salads.”
Hedged longs
Institutions rewrote the rules of BTC options, turning it into a Wall Street parlor game. Puts (bearish bets) suddenly traded at a premium to calls, flipping the script from years past when bullish calls ruled. Not because the market was scared, mind you-just because big players preferred to hedge their bets like they were playing poker with their grandma’s pension.
“The move from call skew to put skew shows real money is long and hedged,” Lakha added, probably while checking his portfolio on a yacht. “Not bearish. Just… cautious. Like a turtle with a helmet.”
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2025-12-31 09:52