Bitcoin’s ascent to its all-time high unfolded against a very unusual backdrop: steadily compressing volatility. While most markets tend to exhibit rising implied volatility as prices push higher, Bitcoin has done the opposite, especially in recent months.
This behavior is perfectly captured by the Bitcoin Volatility Index (BVIV), a metric that tracks the implied volatility of Bitcoin over a fixed horizon based on options pricing.
BVIV is derived from the implied volatility surface of Deribit’s BTC options. Specifically, it calculates a time-weighted average of the 30-day implied volatility across a range of out-of-the-money puts and calls, adjusted for liquidity and skew.
Functionally, BVIV serves as Bitcoin’s version of the VIX: a real-time measure of expected volatility over the coming month. A higher BVIV reading implies that the market anticipates larger price swings, while a lower reading reflects expectations of calm.
Since September 2022, BVIV has ranged from a high of 96.6 during the FTX collapse to a low of 36.3, first recorded in August 2023 and recently matched in late July 2025. The full-sample correlation between BVIV and Bitcoin’s price is slightly negative at -0.13, meaning implied volatility has tended to ease somewhat as the price climbs.
However, that relationship has become materially stronger in recent months: the 12-week rolling correlation between BVIV and BTC price reached -0.45 in early June 2025 and has remained in that range through early August.
The shift is notable because it points to structural changes in how volatility is priced. Historically, rapid BTC rallies, like those seen in 2017 and 2021, often came with expanding volatility as traders piled into upside calls and hedgers paid up for protection.
In contrast, the current environment features a mature options market, deeper liquidity, and a surge in short-volatility strategies across institutional desks. This structural change has allowed BTC to rise sharply without triggering a corresponding spike in implied volatility.
Recent data further confirms this disconnect. During the week ending August 4, Bitcoin closed at $115,050.91, having ranged between $109,200 and $121,000 over the previous five weeks. At the same time, the BVIV fell to 36.3, just 0.01 below its all-time low. Realized volatility over the past month stands at approximately 24%, putting the implied-realized spread at 12 percentage points, among the widest of the past two years.
This setup has critical…
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