Opinion: Wall Street is counting on Bitcoin's high volatility for year-end bonuses.

Written by: Bitwise Advisor Jeff Park

Translated by: Moni, Odaily Planet Daily

In just six weeks, Bitcoin’s market cap evaporated by $500 billion. ETF outflows, Coinbase discounts, structural sell-offs, poorly positioned long positions getting liquidated, and no obvious catalyst to spark a market rebound. What’s more, persistent concerns remain—whale sell-offs, severely losing market makers, lack of defensive liquidity supply, and existential threats from a quantum crisis—all still hinder Bitcoin’s potential for a rapid recovery. However, throughout this downturn, one question has continued to puzzle the community: What’s going on with Bitcoin volatility?

In fact, Bitcoin’s volatility mechanism has quietly shifted.

For the past two years, the mainstream view was that ETFs had “tamed” Bitcoin, suppressing its volatility and turning what was once a macro-sensitive asset into a tool governed by institutional oversight and volatility suppression mechanisms. But if you focus on the past 60 days, you’ll see that this isn’t the case—the market seems to have reverted to its previous volatile state.

Looking back at Bitcoin’s implied volatility over the past five years, you can see clear peaks:

The first (and highest) peak was in May 2021, when a crackdown on Bitcoin mining sent implied volatility soaring to 156%.

The second peak was in May 2022, triggered by the Luna/UST collapse, reaching 114%.

The third peak occurred from June to July 2022 with the liquidation of 3AC.

The fourth peak came in November 2022, when FTX collapsed.

Since then, Bitcoin volatility has never exceeded 80%. The closest it came was in March 2024, when spot Bitcoin ETFs saw three months of sustained inflows.

If you look at the Bitcoin volatility-of-volatility index (vol-of-vol index), an even clearer pattern emerges (this index is essentially the second derivative of volatility, or the speed at which volatility itself changes). Historical data shows the vol-of-vol index peaked at around 230 during the FTX collapse. Yet since ETFs gained regulatory approval and began trading in early 2024, the vol-of-vol index has never broken 100, and implied volatility has kept drifting lower, regardless of spot price movements. In other words, Bitcoin no longer exhibits the signature high-volatility behavior seen in the pre-ETF market structure.

However, over the past 60 days, things have changed—Bitcoin volatility has seen its first uptick since 2025 began.

Looking at the chart above, and noting the color gradient (light blue to dark blue representing “a few days ago”), you’ll notice a brief window where the spot Bitcoin vol-of-vol index climbed to around 125, and implied volatility also rose. At the time, Bitcoin’s volatility metrics seemed to suggest a potential breakout, since volatility had previously correlated positively with spot price. Yet, as we all know now, the rally didn’t materialize—instead, the market reversed and dropped.

Even more interesting: even as spot prices dropped, implied volatility (IV) kept rising. This pattern—falling Bitcoin price and rising implied volatility—has been rare since the ETF era began. You could say we are at another key inflection point in Bitcoin’s volatility regime: implied volatility is reverting to its pre-ETF behavior.

To better understand this trend, let’s further analyze with a skew chart. During major market sell-offs, put option skew usually spikes rapidly—as seen in the three major events mentioned above, where skew reached -25%.

But the most notable datapoint isn’t skew during sell-offs—it’s January 2021, when call option skew peaked above +50%. That was the last true “mega-gamma squeeze” in recent Bitcoin history: Bitcoin’s price shot from $20,000 to $40,000, broke the 2017 all-time high, and triggered a flood of trend-followers, CTAs, and momentum funds. Realized volatility exploded, and traders were forced to buy spot/futures to hedge their short gamma, which in turn pushed prices even higher—this was also when Deribit saw record retail inflows, as traders discovered the power of out-of-the-money calls.

This analysis shows that watching options positioning is crucial. Ultimately, it’s options positions—not just spot trading—that drive the decisive moves to new Bitcoin price highs.

As Bitcoin’s volatility trend “inflection point” reappears, it suggests prices could once again be driven by options. If this shift persists, Bitcoin’s next bull run will be fueled not just by ETF inflows, but by a volatile market—one where more investors enter, seeking profits from volatility—because the market is finally waking up to Bitcoin’s true potential.

As of November 22, 2025, the top five open interest trades by notional value on Deribit are:

1. $85,000 put expiring December 26, 2025, with $1 billion in open interest;
2. $140,000 call expiring December 26, 2025, with $950 million in open interest;
3. $200,000 call expiring December 26, 2025, with $720 million in open interest;
4. $80,000 put expiring November 28, 2025, with $660 million in open interest;
5. $125,000 call expiring December 26, 2025, with $620 million in open interest.

Additionally, as of November 26, BlackRock’s IBIT top ten option positions are as follows:

This shows that demand for options positioning by notional value before year-end exceeds that for options positioning by notional value, and the strike range for options skews even further toward out-of-the-money strikes.

If you further observe the Bitcoin two-year implied volatility chart, you’ll find that the sustained volatility demand over the past two months most closely mirrors the pattern seen from February to March 2024—a period many will remember as one driven by massive ETF inflows. In other words, Wall Street needs Bitcoin to stay highly volatile to attract more investors, because Wall Street is a trend-driven business—they want to maximize profits before year-end bonuses are paid.

Volatility is like a self-perpetuating profit engine.

Of course, it’s still too early to say whether volatility has truly broken out, or whether ETF inflows will follow suit—in other words, spot prices may keep falling. However, if spot prices continue to drop from here while implied volatility (IV) climbs, it’s a stronger signal that a sharp rebound could be near, especially in a “sticky options” environment where traders still favor long options. But if the sell-off endures and volatility stagnates or drops, then the path out of the downtrend narrows considerably—especially with recent structural selling causing a cascade of negative externalities. In that case, the market isn’t so much looking for a rebound as it is slowly forming a potential bear trend.

The next few weeks will be interesting.