Wall Street bets on Bitcoin volatility: year-end bonuses rely on this market trend.

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

Original Author: Jeff Park

Original source:

Reprint: Daisy, Mars Finance

In just six weeks, Bitcoin's market value has evaporated by $500 billion, with ETF funds flowing out, Coinbase trading at a discount, structural sell-offs, and poorly positioned long positions being liquidated, all without any obvious catalysts to stimulate a market rebound. Moreover, the ongoing concerns of whale sell-offs, heavily loss-making market makers, lack of defensive liquidity supply, and the survival threats posed by the quantum crisis continue to hinder Bitcoin's potential for a rapid recovery. However, during this decline, one question has consistently troubled the community: what has happened to Bitcoin's volatility?

In fact, the fluctuation mechanism of Bitcoin has quietly undergone a change.

In the past two years, people generally believed that ETFs had “tamed” Bitcoin, suppressing its fluctuations and transforming this asset, which was once highly sensitive to macroeconomic factors, into a trading tool subject to institutional oversight and volatility control mechanisms. However, if you focus on the past 60 days, you will find that this is not the case; the market seems to have returned to its previous state of volatility.

Looking back at the implied volatility of Bitcoin over the past five years, it can be observed that the peaks of this indicator have traceable patterns:

The first peak (also the highest peak) occurred in May 2021, when Bitcoin mining faced a crackdown, causing implied volatility to surge to 156%;

The second peak occurred in May 2022, triggered by the Luna/UST collapse, reaching a peak of 114%;

The third peak occurred from June to July 2022, when 3AC was liquidated;

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

Since then, the volatility of Bitcoin has never exceeded 80%. The closest it got to 80% was in March 2024, when the spot Bitcoin ETF experienced three months of continuous capital inflow.

If you observe the Bitcoin volatility index (vol-of-vol index), you will find clearer patterns (this index is essentially the second derivative of volatility, or a reflection of the rate of change of volatility itself). Historical data shows that the highest value of the Bitcoin volatility index occurred during the FTX collapse, when the index soared to about 230. However, since the ETF received regulatory approval for listing at the beginning of 2024, the Bitcoin volatility index has never exceeded 100, and implied volatility has continued to decline, unrelated to the spot price movement. In other words, Bitcoin seems no longer to exhibit the iconic high volatility behavior characteristic of the market structure before the launch of the ETF.

However, the situation has changed in the past 60 days, with Bitcoin volatility experiencing its first increase since 2025.

Refer to the above image and note the color gradient (light blue to dark blue represents “a few days ago”). Tracking the recent trends, you will notice a brief window period where the spot Bitcoin volatility index climbed to around 125, while the implied volatility was also rising. At that time, the Bitcoin volatility indicators seemed to suggest a potential breakthrough in the market, especially since the volatility had previously shown a positive correlation with the spot price. However, contrary to expectations, everyone now knows that the market did not rise as anticipated but instead reversed and fell.

Interestingly, even as spot prices decline, implied volatility (IV) continues to rise. It is rare for Bitcoin prices to continuously decline while implied volatility rises since the ETF era. It can be said that we may be at another important “turning point” in the fluctuation pattern of Bitcoin, where the implied volatility of Bitcoin returns to the state it was in before the ETF appeared.

To better understand this trend, we use a skew chart for further analysis. During significant market declines, the skew of put options typically skyrockets - as can be seen, in the three major events mentioned earlier, the skew reached -25%.

But the most noteworthy data point is not the skew during the market decline, but rather in January 2021, when the skew of call options peaked above +50%. At that time, Bitcoin experienced its last true mega-gamma squeeze in recent years: the price of Bitcoin soared from $20,000 to $40,000, breaking the historical high of 2017 and triggering an influx of trend followers, CTAs, and momentum funds. The actual volatility skyrocketed, forcing traders to buy spot/futures to hedge the gamma risk of their short positions, which in turn pushed prices higher—this also marked the first record retail fund inflow into Deribit, as traders discovered the power of out-of-the-money call options.

Analysis shows that observing changes in options positions is very important. Ultimately, it is the options positions — and not just spot trading — that create the decisive trend that drives Bitcoin prices to new highs.

As the trend of Bitcoin volatility reaches another “turning point”, it indicates that prices may once again be driven by options. If this shift continues, the next wave of Bitcoin's rise will not only come from ETF inflows but also from a volatile market (with more investors entering seeking to profit from the fluctuations), as the market finally realizes Bitcoin's true potential.

As of November 22, 2025, the top five trades by nominal amount of USD open contracts on the Deribit platform are as follows:

1. A put option with an expiration date of December 26, 2025, with a strike price of $85,000 and an open contract size of $1 billion.

2. A call option expiring on December 26, 2025, with a notional value of $140,000 and an open interest of $950 million;

3. A call option expiring on December 26, 2025, with a value of 200,000 USD and an open contract size of 720 million USD;

4. A put option expiring on November 28, 2025, with a notional value of $80,000 and an open interest of $660 million.

5. A call option expiring on December 26, 2025, with a notional value of $125,000 and an open interest of $620 million.

In addition, as of November 26, the top ten options positions for BlackRock IBIT are as follows:

It can be seen that the demand for options allocation before the end of the year (calculated by nominal value) is greater than the demand for options allocation (calculated by nominal value), and the range of strike prices for options is more skewed towards out-of-the-money options.

If we further observe the implied volatility chart of Bitcoin over the past two years, we will find that the continuous demand for volatility over the past two months is most similar to the chart trends during the period from February to March 2024. Many people should remember that this was the period of explosive growth driven by the influx of funds into Bitcoin ETFs. In other words, Wall Street needs Bitcoin to maintain high volatility to attract more investors, as Wall Street is a trend-driven industry that likes to maximize profits before year-end bonuses are paid.

Volatility is like a self-driven profit machine.

Of course, it is still too early to assert whether the volatility has formed a breakthrough trend and whether ETF capital flows will follow, which means that spot prices may continue to decline. However, if spot prices continue to fall from their current position while implied volatility (IV) rises during this period, it more strongly indicates that prices may experience a significant rebound, especially in an environment where traders still tend to favor “sticky options”. But if the sell-off continues and volatility stagnates or even declines, the path out of the bearish range will be greatly narrowed, especially given the recent structural sell-off triggering a series of negative external effects. In this case, the market is less about looking for a rebound point and more about gradually forming a potential bearish trend.

The next few weeks will be very interesting.