Bitcoin is currently trading at about $112,000, roughly 10% below its all-time high of $124,500 set in mid-August. Despite this elevated price level, realized volatility – a past glance of the asset’s price fluctuations – has significantly compressed. The 180-day volatility, measured as the standard deviation of daily log returns, is now at 2.07%, one of the lowest levels recorded.
Derivatives Diverge as Bitcoin Volatility Nears Historic Lows
10 September 2025 - 09:18 CEST
Historically, such low-volatility regimes have preceded significant price moves. Lower readings have only occurred twice: in late 2017, just before BTC’s rally from ~$778 to ~$20,000, and in October 2023, ahead of a move from ~$25,000 to ~$70,000 within five months. However, both of those rallies emerged from much lower absolute price levels. At cycle highs, suppressed volatility can just as easily indicate distribution or fragile complacency, rather than a setup for further upside.
In the derivatives market, total futures open interest (OI) has climbed to over $50 billion, reflecting a significant buildup in leveraged exposure. However, the composition of OI reveals a divergence:
- Perpetual futures OI has reached a new record high of $34.65bn, rising alongside BTC’s price.
- Non-perpetual futures OI has declined to $17bn, down from a peak of $25bn in Dec 2024.
Among non-perpetual contracts, CME futures dominate, accounting for $15.3bn, or 86% of the total non-perpetual OI. This concentration suggests that CME continues to serve as the primary traditional finance venue for exposure to Bitcoin futures.
One measure shows that investors using carry trade strategies for BTC futures aren’t doing so well out of this situation. A carry trade involves capturing the yield between spot and futures prices, typically by shorting futures and holding spot. The annualized basis, a common proxy for expected yield in carry trade strategies, has declined from an average of 4.97% in early January to just 2.33% today.
This compression could help explain the sharp reduction in non-perpetual futures OI, as lower basis levels diminish the appeal of two types of trades:
- cash-and-carry – which seek to exploit the difference between the price of an underlying asset and the price of its derivative; and
- calendar spread trades – a play on the expiration dates of similarly priced contracts.
This applies in particular for desks at financial institutions with stringent minimum requirements on the minimum expected return for a trading activity to be considered viable.
On the perpetual side, funding rates remain positive, with the annualized 1-year average at 7.7%, indicating a certain amount of ongoing demand for long exposure .
With volatility near record lows and derivatives activity increasingly split between the different types of contracts mentioned above, market conditions are not normal for this stage of the cycle. While price direction remains uncertain, in this analyst’s view, a pickup in volatility appears increasingly likely: prolonged calm in crypto markets, like a quiet group of children, rarely ends without disruption.
Data source: Coinmetrics
