Bitcoin Volatility Decreases as Market Matures, Analysts Report

In brief

Bitcoin reached a new all-time high of $118,667 on Friday, which is approximately $7,000 higher than the previous record earlier this week.

However, analysts indicate that future price increases may occur at a slower rate compared to previous periods of rapid growth. This is attributed to the expansion of the options market.

Bitcoin exchange-traded funds (ETFs) are also considered influential, with these funds experiencing over $1 billion in inflows on both Thursday and Friday.

Bitcoin Price Trends

Bitcoin has reached new price highs, but analysts suggest that the rate of increase may be slower than in previous cycles.

According to analysts, volatility in Bitcoin is decreasing. As the asset matures and is used by traders for more complex strategies, rapid price increases are considered less likely.

[Removed emotional analogy: "Think of it like someone who's working out—a massive spike higher is like someone crash dieting to hit their weight goal, and then they just lose it three weeks later,"]

Greg Magadini, Amberdata's director of derivatives, stated that gradual price increases are more sustainable than rapid, large rallies. He noted that as Bitcoin's market capitalization grows, larger amounts of capital are required to influence its price.

In previous cycles, Bitcoin experienced significant price increases. For example, in 2017, Bitcoin's price rose to $19,345 in December from $786 at the start of the year, representing a 2,360% increase, according to CoinGecko.

The cryptocurrency's price reached a new high of $118,667 on Friday, representing an increase of approximately 25% from the beginning of 2025, when it was trading at around $93,500. Bitcoin's realized volatility is currently 29.5%, compared to 100% in 2021.

Derivatives and ETF Influence

The derivatives market provides context for these changes. In 2021, the options market for Bitcoin was smaller, with a peak of over $15 billion in October. In May, open options contracts for Bitcoin increased to over $42.5 billion on Deribit.

Currently, traders are purchasing Bitcoin through new exchange-traded funds, which were approved last year, and utilizing trading features associated with them.

The process involves investors with significant Bitcoin holdings selling call options—contracts based on the future price of the asset—which adds liquidity to the market. As traders use this strategy, volatility decreases because they do not anticipate large price movements. Other traders then adjust their expectations and strategies accordingly.

"We see this with equities: When markets are bullish, they grind higher at a slower pace with less volatility," Magadini said.

"With [BlackRock's iShares Bitcoin Trust] we have a new class of market makers with significant capital who can manage volatility bets more easily," he added, noting that Bitcoin previously had a smaller asset base and fewer market makers.

Institutional Participation

The asset is now attracting a different group of investors, including those with institutional capital, primarily through the new ETFs, according to market observers.

Bitcoin spot ETFs recorded $1.17 billion in inflows on Thursday, which was their second-largest day since their introduction in January 2024, led by BlackRock, Fidelity, and ARK Invest. On Friday, inflows remained high, totaling approximately $1.03 billion.

Volatility Outlook

Analysts note that significant price fluctuations may still occur.

"I would definitely not rule out periods of high volatility," David Lawant, head of research at FalconX, told Decrypt, adding that future price surges may "be locked into a tighter time period."