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 implications. First, it suggests a market that is aggressively short volatility. Dealers and structured product desks are increasingly comfortable selling premium, assuming the BTC market will remain range-bound or trend gently upward.
The narrow spreads and flat term structure reflect a belief that no major directional catalyst is imminent. Second, the funds that rely on volatility inputs to size exposure can now hold more BTC per unit of risk. This introduces a self-reinforcing feedback loop: as implied vol compresses, systematic flows increase, further stabilizing the market until a shock occurs.
There’s also a tactical interpretation. When implied volatility hits record lows while price hovers near all-time highs, historical precedent suggests an elevated probability of abrupt reversal or breakout. Prior BVIV troughs (like those in August 2023 and February 2024), were followed within two to three months by spikes above 55 and spot moves exceeding 18% in either direction.
This is not a prediction of reversal, but rather a warning that the options market is currently pricing in far less movement than has typically occurred following such conditions.
With volatility low and directional conviction high, options are cheap relative to realized price swings. This creates opportunities for those seeking to accumulate long exposure to volatility itself, particularly through longer-dated call spreads, strangles, or calendar structures. The current setup offers consistent carry for market makers but elevates the risk of a gamma squeeze if flows suddenly reverse.
The emerging picture is one of a maturing, but potentially overconfident, market. Bitcoin’s ability to float above $110,000 without sparking a jump in BVIV reflects improved liquidity, deeper institutional participation, and more sophisticated volatility selling.
But history suggests that such periods are finite. Whether through a regulatory surprise, macro shock, or unexpected sell-off, the next expansion in volatility is likely to be sharp because the premium currently being collected for taking that risk is vanishingly small.
For now, the volatility floor has held. But if the past is any guide, compression this extreme rarely persists for long.
