Core Insights - Bitcoin's volatility is awakening after a period of dormancy in 2025, indicating a phase of increased price fluctuations and uncertainty [1] Volatility Trends - The 30-day implied volatility index (BVIV) has recently surged past a trendline, confirming a bullish breakout with an annualized volatility of 73% [2] - Analysts attribute the sustained elevated volatility to shifts in market flows, weaker liquidity, and ongoing macroeconomic concerns [3] Market Dynamics - Long-standing volatility sellers, including OG holders, miners, and whales, have reduced their activity, which previously dampened price swings through aggressive call overwriting [4] - Following a significant selloff on October 10, where Bitcoin dropped from nearly $120,000 to $105,000, these sellers have retreated, leading to fewer call overwrites and an increase in implied volatility [5] Demand for Hedging - There is a growing demand for downside put protection among institutional investors as spot prices decline, indicating a shift in market sentiment [6] - The combination of limited volatility supply, increased demand for downside hedging, and a structurally weaker liquidity environment suggests that elevated volatility levels may persist [7] Liquidity Concerns - Liquidity has weakened significantly since the October 10 crash, making prices more sensitive to large buy and sell orders [8] - Market makers faced heavy losses during the crash, with forced liquidations amounting to $20 billion, leading to a reduction in trading activity due to concerns over automatic deleveraging mechanisms [9]