Bitcoin Market Calms in 2025 as Institutions Use Derivatives to Generate Yield
In 2025, the Bitcoin market experienced a notable decline in volatility as institutions increasingly utilized derivatives to generate yield from idle holdings. The 30-day annualized implied volatility dropped from approximately 70% to around 45%, reaching a low of 35% in September, based on BVIV and DVOL metrics. This downshift was primarily driven by institutional investors selling covered calls on their spot Bitcoin positions to harvest yield.
With over 12.5% of mined Bitcoin allocated in ETFs and treasuries during 2025, the lack of native yield encouraged the widespread use of call overwriting as a key yield strategy. The consistent supply of options from call selling exerted persistent pressure on implied volatility from the supply side. Meanwhile, demand for put options increased relative to calls, with puts trading at a lasting premium across both short- and long-term expiries. This pattern indicated hedging activity rather than a bearish market outlook.
Market observers viewed the growing put skew and hedging as signs of real-money investors buying protection and maintaining long positions. Industry experts supported this interpretation; Imran Lakha of Options Insights attributed the decline in implied volatility to institutional yield harvesting through upside call selling, while Jake Ostrovskis of Wintermute emphasized the influence of ETF and treasury flows as major drivers.
Throughout the year, Bitcoin traded around $88,427.51, reflecting the calmer market environment established by these institutional activity patterns.
