Bitcoin rise to the highest ever high against a very unusual background: volatility that is steadily compressed. Most markets tend to show implicit volatility increases due to their high prices, but Bitcoin has been opposed, especially in recent months.
This behavior is captured entirely by the Bitcoin Volatility Index (BVIV), a metric that tracks the implicit volatility of Bitcoin on a fixed horizon based on optional pricing.
BVIV is derived from the implicit volatile surface of Deribit’s BTC option. Specifically, we calculate the average time weights of implicit volatility over 30 days across different money puts and calls tailored to liquidity and skew.
Functionally, BVIV acts as a version of Bitcoin’s Vix. This is a real-time measure of expected volatility over the next month. A high reading of BVIV means that the market predicts a larger price shaking, but a lower reading reflects mild expectations.
Since September 2022, BVIV was first recorded in August 2023 from a peak during the FTX collapse from 96.6 and recently coincided in July 2025. The full sample correlation between BVIV and Bitcoin prices was slightly negative at -0.13, meaningful volatility has fueled the crime.
However, this relationship has been practically stronger in recent months. The 12-week rolling correlation of BVIV and BTC prices reached -0.45 in early June 2025, remaining in that range until early August.
The change is notable as it indicates a structural change in volatility pricing. Historically, rapid BTC rallies, such as those seen in 2017 and 2021, often expanded volatility as traders were stacked up into upside calls and hedgers were paid for protection.
In contrast, the current environment is characterized by a mature options market, deeper liquidity, and a surge in short volatile strategies across facility desks. This structural change allowed the BTC to rise sharply without triggering corresponding spikes of implicit volatility.
Recent data further confirms this disconnect. During the week ending August 4th, Bitcoin was closed at $115,050.91, ranging from $109,200 to $121,000 over the past five weeks. At the same time, BVIV fell to 36.3, bringing the record low of 0.01 to just 0.01. The volatility realized over the past month is around 24%, bringing the implicit realization spread to 12% points, among the widest points of the past two years.
This setup has important implications. First, it suggests a market that is aggressively short volatility. Dealers and structured product desks are increasingly selling premium sales, assuming that the BTC market remains bound by scope or mildly trending.
The narrow spread and flat terminology reflect the belief that the main directional catalyst is not imminent. Second, funds that rely on volatility input and size exposure can now hold more BTC per unit of risk. This introduces a self-enhancing feedback loop. As the implied Vol compresses, systematic flow increases, further stabilizing the market until shock occurs.
There are also tactical interpretations. When implied volatility reaches record lows and prices approach an all-time high, the historic precedent suggests a high probability of a sudden reversal or breakout. The previous BVIV trough (similar to the August 2023 and February 2024) had more than 55 spikes within two to three months, with spot movements of over 18% in both directions.
This is not a reversal forecast, but a warning that the options market is currently priced with much less movement than normally occurring according to such conditions.
Low volatility, higher directional convictions, and options are cheaper than realized price movements. This creates opportunities for those seeking to accumulate long exposure to volatility itself, especially through long-term call spreads, strangleholds, or calendar structures. The current setup provides consistent carry for market makers, but if the flow suddenly reverses, it increases the risk of gunmask ease.
Emerging paintings are one of a mature, yet overconfident market. Bitcoin’s ability to exceed $110,000 without causing a jump in BVIV reflects improved liquidity, deeper institutional participation, and sales of more refined volatility.
However, history suggests that such periods are finite. The next expansion of volatility could be sharp as the premiums currently collected to take that risk through regulatory surprises, macro shocks, or unexpected sales.
For now, the volatility floor is retained. However, if the past is a guide, this extreme compression rarely lasts for a long time.
Post-record compression of implicit volatility set the next big move for Bitcoin, which first appeared in Cryptoslate.
