Bitcoin Hits $118,667 All-Time High, 25% Gain in 2025 Amid Decreasing Volatility

Bitcoin reached a new all-time high of $118,667 on Friday, marking a significant increase of nearly $7,000 from earlier in the week. However, experts suggest that the cryptocurrency's ascent may be slower compared to previous bull runs. This shift is attributed to the growing options market and the increasing maturity of Bitcoin as an asset.

As Bitcoin matures, its volatility is decreasing, making it less likely to experience the rapid, unsustainable climbs seen in the past. Greg Magadini, Amberdata's director of derivatives, compared this to a sustainable workout regimen versus a crash diet. He noted that as Bitcoin's market capitalization grows, it requires more capital to move the price significantly.

In previous cycles, Bitcoin's price surges were often dramatic. For instance, in 2017, Bitcoin's price skyrocketed from $786 to $19,345 by December, a 2,360% increase. In contrast, Bitcoin's price hit a new high of $118,667 on Friday, up about 25% from the start of 2025 when it was trading at roughly $93,500. Its realized volatility is now 29.5%, a significant drop from 2021's 100%.

The derivatives market provides insight into this trend. In 2021, the options market was considerably smaller, peaking in October at over $15 billion. By May, Bitcoin open options contracts surged to over $42.5 billion on Deribit. This growth indicates that traders are now buying Bitcoin through new exchange-traded funds (ETFs) and using various trading features on them.

Investors with substantial Bitcoin holdings are selling call options, which are contracts betting on the future price of an asset. This strategy adds liquidity to the market and reduces volatility as sophisticated traders sell options without expecting significant price movements. Other traders adjust their expectations and bets accordingly, leading to a more stable market environment.

Magadini compared this to the equity market, where bullish markets tend to grind higher at a slower pace with less volatility. With the introduction of Bitcoin ETFs, a new class of market makers with deep pockets can easily warehouse volatility bets, further stabilizing the market. Previously, Bitcoin was a smaller asset class with smaller market makers.

The asset is now attracting a more mature class of investors, with institutional capital entering the Bitcoin space primarily through ETFs. Bitcoin spot ETFs pulled in $1.17 billion on Thursday, their second-biggest day since their debut in January 2024, led by major players. On Friday, they remained strong, with about $1.03 billion worth of inflows.

Despite the decreasing volatility, Bitcoin's dramatic swings may not vanish completely. David Lawant, head of research at FalconX, noted that periods of high volatility are still possible, but price surges might be locked into tighter time periods. This suggests that while Bitcoin's overall volatility is decreasing, it may still experience significant price movements within shorter time frames.