Bitcoin Volatility Rises: The Undercover Battle on Wall Street for Gains Before Year-End

Key Observation: Over the past two months, the volatility structure of Bitcoin has undergone subtle yet crucial shifts.

In just six weeks, Bitcoin’s market capitalization shrank by $50 billion. Net outflows from ETFs, Coinbase trading discounts, institutional structural selling, forced liquidation of adverse positions—all these are happening, yet the market lacks clear catalysts for a recovery. Whales selling, market makers suffering heavy losses, the disappearance of defensive liquidity providers, and ongoing concerns about quantum threats remain persistent.

However, the real question capturing market attention is: What exactly has happened to Bitcoin’s volatility?

The Myth of ETF “Taming” Is Crumbling

For a long time, industry consensus held that: the advent of spot ETFs “tamed” Bitcoin, suppressing its volatility and transforming this historically macro-sensitive asset into a carefully managed trading instrument constrained by volatility suppression mechanisms.

But looking at the data from the past 60 days, this explanation no longer holds. The market seems to be reverting to the kind of dramatic volatility seen before the ETF era.

Reviewing the historical peaks of Bitcoin’s implied volatility over the past five years:

• May 2021: Mining restrictions caused implied volatility to spike to 156% (all-time high)
• May 2022: Luna/UST collapse reached 114%
• June to July 2022: 3AC liquidation event
• November 2022: FTX collapse triggered intense volatility

Since the FTX event, Bitcoin’s volatility has never broken above 80%. The closest was March 2024, when spot ETFs saw three consecutive months of inflows. But from early this year until recently, after regulatory approval of ETFs, Bitcoin’s volatility index has remained below 100—until now.

What the “Second Derivative” of Volatility Reveals

More telling is the vol-of-vol index, which measures the volatility of volatility—that is, how quickly volatility itself changes. Historical data shows this peaked around the FTX collapse at about 230.

But since ETF approval in early 2024, this index has never exceeded 100. Until recently—in just 60 days, Bitcoin’s volatility has begun to rise again.

In the chart above, the gradient from light blue to dark blue indicates “recent days.” Careful observation of the latest data points shows: the spot Bitcoin volatility index once surged to about 125, with implied volatility rising as well. All signs pointed to a breakout—after all, historically, volatility and spot prices have been positively correlated.

But the market unexpectedly reversed. Prices did not rise; they fell. Even more interestingly, despite the spot price hitting a bottom, implied volatility continued to climb.

Since the ETF era, such “price drops accompanied by rising volatility” has been extremely rare. This is a critical signal: Bitcoin’s volatility behavior is at another major inflection point.

Options Skew Chart Reveals Market’s True Expectations

Examining the options skew chart further confirms this shift. During sharp declines, put skew typically spikes rapidly—each of the three major events in history saw it reach -25%.

But the most notable data point is from January 2021—when call skew hit over 50%, a record high. What happened then? Bitcoin experienced its last true “Mega-Gamma squeeze”: price surged from $20,000 to $40,000, breaking the 2017 all-time high, triggering a rush of FOMO, CTAs, and momentum funds.

Implied volatility exploded, traders were forced to buy spot/futures to hedge gamma risk, and prices soared further—this was also the first time Deribit saw massive retail inflows, as retail traders discovered the power of OTC call options.

The “Stickiness” Signal in Current Options Market

As of November 22, 2025, Deribit’s open interest by notional value in the top five options positions is:

1. Put options (strike $85,000, expiring December 26, 2025): $1.1 billion
2. Call options (strike $140,000, expiring December 26, 2025): $950 million
3. Call options (strike $200,000, expiring December 26, 2025): $720 million
4. Put options (strike $80,000, expiring November 28, 2025): $660 million
5. Call options (strike $125,000, expiring December 26, 2025): $620 million

These positions reveal an important pattern: the demand for options (by notional value) before year-end outweighs supply, with strike ranges clearly skewed toward OTC options.

Bitcoin’s current spot price is $90,800, with a market cap of $1.81 trillion. Comparing the evolution of two-year implied volatility from February to March 2024, the volatility demand patterns are remarkably similar—coinciding with the period when ETFs were massively inflowing and pushing Bitcoin higher.

Wall Street’s Year-End “Survival Game”

Here’s the key point: Wall Street needs high Bitcoin volatility to attract more participants—because the industry is trend-driven, and year-end bonuses depend on locking in gains.

Volatility acts like a self-sustaining, profit-driven machine.

Of course, it’s still premature to say whether volatility has truly broken out or if ETF inflows will follow. Theoretically, spot prices could continue to decline. But if prices fall while implied volatility keeps rising—especially with options “stickiness” and traders betting on options—this could signal a strong rebound.

Conversely, if selling continues and volatility stagnates or declines, the path out of the downturn will narrow significantly—particularly if structural selling triggers a chain reaction of negative effects. At that point, the market isn’t looking for a reversal but is gradually forming a potential bear market.

The coming weeks will be decisive. The trend in the options market may be a better predictor of Bitcoin’s next move than spot trading itself.