Institutions sell options to generate profits, and Bitcoin will enter a "low volatility era" in 2025

In 2025, the overall performance of the Bitcoin market has become more tranquil, primarily due to institutional investors widely adopting a strategy of “selling options to generate income.” Against the backdrop of expanding holdings in spot Bitcoin and Bitcoin ETFs, institutions are no longer solely betting on price increases but are continuously realizing gains through derivatives, which is structurally suppressing Bitcoin’s market volatility.

Data shows that the 30-day annualized implied volatility of Bitcoin has significantly declined. The BVIV index from Volmex and the DVOL index from Deribit indicate that implied volatility was around 70% at the beginning of the year, but by year-end, it had fallen to approximately 45%, with a low point of 35% in September. These indicators reflect market expectations of price fluctuations over the next month; their persistent decline suggests that investors’ anticipation of sharp short-term volatility in Bitcoin is weakening.

The core driver of this change stems from a shift in institutional strategies. An increasing number of institutions holding Bitcoin spot or Bitcoin ETFs are selling out-of-the-money call options to earn stable option premium income. Since out-of-the-money call options require a significant rise in Bitcoin’s price to become valuable, during sideways or mildly volatile periods, these options often expire worthless, allowing sellers to profit continuously. According to Options Insights founder, the ongoing inflow of institutional funds has led to a noticeable structural decline in Bitcoin’s implied volatility.

Research from Wintermute’s OTC trading division also confirms this trend. The report shows that currently, over 12.5% of Bitcoin mining output is allocated to low-yield instruments such as ETFs and government bonds. Since these assets do not generate cash flow themselves, selling covered call options has gradually become the dominant trading strategy in 2025, continuously suppressing implied volatility from the supply side.

Meanwhile, the structure of the Bitcoin options market is also changing. For most of 2025, whether for short-term or long-term expiry contracts, implied volatility for put options has been higher than that for call options, exhibiting a clear put skew. This phenomenon does not necessarily indicate a bearish market sentiment but more reflects that institutions, while holding long spot positions, actively buy put options for risk hedging.

Overall, the deep participation of institutional investors is bringing Bitcoin’s price behavior closer to that of traditional financial assets. Low volatility and a yield-oriented trading structure may become one of the key features of the Bitcoin market in 2025.