coindesk.com
Bitcoin BTC$91,928.94 and ether ETH$3,125.01 traders have recently looked past a barrage of catalysts, including geopolitical tensions and ETF flows, to wager on low volatility and reduced near-term risks.
That's evident from the recent slide in the 30-day implied volatility (IV) indices tied to bitcoin and ether. These indices reflect investors' expectations of price volatility. When they drop, traders see less drama and calmer times ahead and vice versa.
BTC's annualized 30-day IV, as measured by Deribit's DVOL index, has dropped to 40%, the lowest since October. The index hit a high of 59% during the November sell-off, according to data source TradingView. Volme'x BTC volatility index, BVIV, also shows a similar meltdown in expected volatility.
Ether's implied volatility index, ETH DVOL, has dropped below 60%, the lowest since September 2024, down from the November high of 80.38.
The declining volatility means traders aren't rushing into options or snapping up hedging contracts as they did in October and November. In other words, traders expect a calmer market with lower risk ahead, even as weak demand for U.S.-listed spot Bitcoin ETFs and a strong dollar index hint at possible downside.
At the same time, they're dismissing talk of bullish volatility driven by haven demand in the wake of the U.S. attack on Venezuela and Iran tensions.
"From an options market perspective, this compression reflects expectations of reduced short-term uncertainty and a higher probability of consolidation rather than large directional moves," Markus Thielen, founder of 10x Research, said in a note to clients.
"Traders appear to be unwinding hedges or supplying volatility through range-based strategies, consistent with lower demand for near-date protection," he added.
Options are derivative contracts that give the purchaser the right but not the obligation to buy or sell the underlying asset, in this case, BTC and ETH, at a predetermined price at a later date. A call option gives the right to buy and represents a bullish bet on the market, while a put option protects the buyer from downside risks.
Traders often sell both call and put options when anticipating a volatility lull and buy both when they expect a large move in either direction.
Last week, traders sold both options on Deribit to profit from a volatility decline. "Option activity over the past week has concentrated primarily on calls sold and puts sold, indicating that a large share of notional traded is tied to volatility-selling strategies rather than outright directional bets," Thielen said.
Ether risk gap shrinks
Ether's perceived risk relative to bitcoin has dropped sharply, signaling traders are unwinding hedging bets in Ethereum's native token more rapidly.
The spread between ether and bitcoin's 30-day implied volatility indices fell to 16 last week, the lowest since April 2025, having peaked above 30 in August last year.
"Ethereum’s faster decline in volatility suggests that speculative or event-driven positioning is being unwound more aggressively, reinforcing the broader signal that near-term tail risks are easing rather than building," Thielen said.
Note that the ether-bitcoin volatility spread remains positive, a sign that traders expect ETH to move a bit more than bitcoin.
Broadly speaking, both BTC and ETH are expected to chill, but ETH carries a tad more expected wiggle room.