Bitcoin and ether investors anticipate a period of reduced volatility

Bitcoin and Ether Traders Embrace Calm as Volatility Drops

Recently, traders in bitcoin (BTC) and ether (ETH) have largely disregarded a range of market influences—including geopolitical unrest and ETF activity—in favor of betting on a period of subdued volatility and diminished short-term risk.

This trend is reflected in the notable decline of the 30-day implied volatility (IV) indices for both bitcoin and ether. These indices gauge market participants’ forecasts for price swings; when they decrease, it signals expectations for a steadier, less turbulent market environment.

According to Deribit’s DVOL index, bitcoin’s annualized 30-day IV has fallen to 40%, marking its lowest point since October. The index previously surged to 59% during the sell-off in November, as reported by TradingView. Similarly, Volmex’s BTC volatility index, BVIV, indicates a comparable reduction in anticipated volatility.

For ether, the ETH DVOL index has dipped below 60%, reaching its lowest level since September 2024, down from a November peak of 80.38.

This decrease in volatility suggests that traders are no longer aggressively purchasing options or seeking hedging contracts, a stark contrast to the activity seen in October and November. In essence, the market is bracing for a quieter phase with fewer risks, even as factors like tepid demand for U.S.-listed spot Bitcoin ETFs and a robust dollar index hint at potential downside.

At the same time, traders are largely ignoring speculation about increased volatility driven by safe-haven demand following recent U.S. actions in Venezuela and ongoing tensions with Iran.

Markus Thielen, founder of 10x Research, explained in a client note, “From the perspective of the options market, this compression signals expectations for less short-term uncertainty and a greater likelihood of price consolidation rather than significant directional moves.”

He further noted, “Market participants seem to be unwinding their hedges or providing volatility through range-bound strategies, which aligns with the reduced appetite for near-term protection.”

Options are financial derivatives that grant the holder the right, but not the obligation, to buy or sell an asset—such as BTC or ETH—at a set price on a future date. Call options allow the purchase of the asset and are typically used for bullish strategies, while put options offer downside protection.

When traders anticipate a period of low volatility, they often sell both call and put options. Conversely, they buy both types when expecting significant price movements in either direction.

Last week, traders on Deribit sold both calls and puts to capitalize on the anticipated drop in volatility. Thielen observed, “Recent option activity has been dominated by the selling of both calls and puts, indicating that much of the trading volume is focused on volatility-selling strategies rather than outright directional bets.”

Ether’s Risk Premium Narrows

The perceived risk associated with ether compared to bitcoin has declined sharply, indicating that traders are unwinding their hedges in Ethereum more quickly than in bitcoin.

The gap between ether and bitcoin’s 30-day implied volatility indices narrowed to 16 last week, the smallest margin since April 2025, after reaching over 30 in August of the previous year.

Thielen commented, “The more rapid decrease in Ethereum’s volatility suggests that speculative or event-driven positions are being closed out more aggressively, reinforcing the broader message that immediate tail risks are subsiding rather than intensifying.”

It’s worth noting that the volatility spread between ether and bitcoin remains positive, which means traders still expect ETH to experience slightly larger price swings than BTC.

Overall, both BTC and ETH are anticipated to remain relatively stable, though ETH is expected to retain a bit more room for movement.