Is Bitcoin Volatility Vacation Over? Chart Suggests So, Analysts Cite 3 Catalysts

Bitcoin's BTC$89,666.41 volatility, in hibernation for much of 2025, is stirring awake, signaling a phase of heightened price swings and uncertainty.

The shift is evident in Volmex's 30-day implied volatility index (BVIV), derived from options pricing. The BVIV recently surged past a trendline characterizing the year-to-date decline from an annualized 73%, confirming what aficionados of technical analysis would call a bullish breakout. The technical pattern means volatility could continue to rise in the days ahead, implying increased market turbulence.

Analysts agree with the chart’s signal, citing shifts in market flows, weaker liquidity, and ongoing macroeconomic concerns as key reasons why volatility is likely to stay elevated in the near term.

Diminishing volatility sellers

Long-standing volatility sellers – including OG holders, miners, and whales – had been dampening price swings by aggressively call overwriting throughout 2025, according to Jimmy Yang, co-founder of institutional liquidity provider Orbit Markets.

This strategy, aimed at generating yield on top of spot holdings, helped drive implied volatility down earlier in the year. However, since the sharp Oct. 10 selloff, when bitcoin dropped from nearly $120,000 to $105,000 and altcoins plunged by more than 40%, these players have retreated.

The retreat means fewer call overwrites are weighing on implied volatility (IV). Meanwhile, traders are increasingly snapping up out-of-the-money puts below $100,000, pushing the IV higher, as reported by CoinDesk.

"The typical volatility sellers—big whales, OG holders and miners—have notably stepped back, consistent with their tendency to sell call options only in rising markets. On the other side, demand for downside put protection has picked up among institutional investors as spot prices continue to drift lower," Yang told CoinDesk.

"Overall, the combination of limited vol supply, increased downside hedging demand, and a structurally weaker liquidity environment suggests that elevated volatility levels could persist in the near term," Yang added.

Thin liquidity amplifying moves

Liquidity – the market's ability to absorb large orders without causing sharp price movements – has weakened significantly since the Oct. 10 crash, making the price more sensitive to a few large buy and sell orders.

That's because some market makers reportedly took heavy losses during the crash as record forced liquidations worth $20 billion cascaded through the market. Others, according to Yang, have reportedly curtailed their trading activity amid concerns over automatic deleveraging (ADL) mechanisms.

With fewer liquidity providers actively quoting prices and order books growing thinner, price swings have become more pronounced, amplifying overall volatility, Yang explained.

Jeff Anderson, head of Asia at STS Digital, voiced a similar opinion, saying institutional players have lowered risk limits, adding to liquidity issues.

"The market has been struggling with poor liquidity and lower volumes since the 10-Oct selloff. A number of institutional players have lowered risk limits and pulled back from trading as the dust settles. Jeff Anderson, head of Asia at STS Digital," Anderson said. "This change in market structure will keep option prices [and implied volatility] elevated until sentiment and credit improves."

Anderson, however, stressed that the high-volatility regime may not last long unless the artificial intelligence (AI) bubble pops.

Macro jitters

Macro headwinds add another dimension of risk. Griffin Ardern, head of BloFin Research and Options, points to the ongoing U.S. government shutdown drama and pricey fiat liquidity as factors keeping volatility elevated.

Although the Senate approved a plan to reopen the government, political uncertainty remains until the House and the President sign off on it. Meanwhile, missing U.S. economic data clouds the Fed’s policy outlook, as hawkish inflation concerns stall rate cuts. During the October meeting, inflation hawks at the central bank pushed for a pause in rate cuts, and the division may not end soon.

Ardern noted, "The pricing of macroeconomic and liquidity risks has led not only to increased implied volatility but also to ongoing pricing of higher tail risks and backwardation in the butterfly term structure since Oct. 12."

He emphasized that these risks are systemic, rooted in macro conditions rather than specific assets, adding that, "the pricing of macro-level risks is unlikely to fall in the short term, which is the main reason why the current IV remains high," Ardern noted.