Bitcoin’s price volatility has surged in recent months, indicating a possible return to a pricing environment driven by options, which tends to generate significant market movements. After the approval of Bitcoin exchange-traded funds (ETFs) in the United States, implied volatility levels remained below 80%. However, current data suggests that Bitcoin’s volatility may soon approach 60%.

A graph shared by Jeff Park, a market analyst at Bitwise, illustrates this gradual increase in volatility. He pointed out the historical context of Bitcoin’s fluctuating dynamics, particularly highlighting the explosive price movements seen in January 2021 that fueled a significant bull run, ultimately leading Bitcoin to reach an all-time high of $69,000 later that year.

“Ultimately, it is options positioning, not just spot flows, that creates the decisive moves that carry Bitcoin to new highs. It’s possible that for the first time in nearly two years, the volatility surface is flickering with early signs that Bitcoin might become option-driven again.”
—Jeff Park

The analysis contradicts the notion that the advent of ETFs and institutional investment has consistently stabilized Bitcoin’s volatility and shifted market patterns towards a more developed asset landscape, aided by passive contributions from investment mechanisms.

Volatility on the Rise Amid Market Turbulence

The heightened volatility in Bitcoin’s market aligns with trends observed across various asset classes, according to Richard Teng, CEO of Binance. Recent events have seen Bitcoin dropping below $85,000, igniting concerns over potential further declines in the near future, which could trigger the onset of another bear market.

Analysts speculate various reasons behind the downturn, including liquidations of highly leveraged derivatives positions, long-term Bitcoin holders taking profits, and prevailing macroeconomic factors. Despite the current downturn, analysts at Bitfinex assert that these shifts reflect short-term disruptions rather than a fundamental lack of demand or institutional retreat, reinforcing the underlying strength of Bitcoin’s long-term trajectory and adoption trends.