Crypto Market Maturation: Decreased Volatility and Rising Options Adoption

The crypto market has experienced a significant reduction in volatility in recent years, largely attributed to the influx of institutional investors and a shift towards options and derivatives trading. Sidrah Fariq, Head of Retail Sales at Deribit, highlights that Bitcoin s implied volatility index BTC DVOL has remained below 100 since 2022, indicating a maturing market despite Bitcoin reaching new all-time highs.
This decrease in volatility is linked to the approval of spot Bitcoin ETFs in January 2024, which enabled institutions to gain exposure to Bitcoin through regulated investment vehicles. As a result, Deribit has seen its institutional share of business grow from 80 to 85 over the past three years, reflecting increasing institutional demand and market sophistication.
However, crypto options still represent only about 2.8 of the overall derivatives space, with Deribit holding around 85 market share on open interest. Augustine Fan, Partner and CFO at Signalplus, points out that the crypto options market is still in its early stages compared to traditional markets, as evidenced by the disparity between options and futures volume.
To prepare for the anticipated surge in demand for options, Deribit is implementing initiatives to attract new users to its platform. One such initiative is a trading competition with a 450,000 USDC prize pool aimed at providing beginners with the necessary tools and education for options trading.
Regarding regulation, both Fariq and Fan agree that it is evolving to align with traditional finance TradFi standards to facilitate institutional participation. They acknowledge progress towards clearer regulatory frameworks, such as Markets in Crypto-Assets MiCA in the EU and the GENIUS Act in the U.S. However, they also emphasize that the lack of regulatory clarity remains a key limiting factor for institutional participation.
Looking ahead, Fan predicts that crypto options will become a dominant trading instrument for both retail and institutional accounts. He envisions a future where listed options are available for all major tokens and a liquid volatility curve is supported by automated market makers globally.