Bitcoin: Structurally Volatility Selling Works｜Matrixport Research

Bitcoin’s explosive volatility has attracted many options traders, many hoping to profit from sharp moves. However, historical data shows that most Bitcoin options buyers lose money over time — a pattern consistent with traditional options markets. The reasons are rooted in structural market dynamics, particularly the relationship between implied volatility and realized volatility.

Bitcoin options are typically priced with a high implied volatility on major options exchanges. Analysis from 2021–2025 shows that Bitcoin’s 90-day implied volatility (IV) averages 5.8 volatility points higher than realized volatility (RV) over equivalent periods. For example, when the market priced in 70% implied volatility, Bitcoin’s realized volatility was around 64.2%. Or in other words, traders buy options that are priced with 70% implied volatility, while they tend only to realize 64.2% volatility.

In Bitcoin, profitable option buying requires catching large, unexpected moves that the market fails to price in. Timing these events is extremely difficult. Without a significant volatility spike or directional breakout, most long calls and puts decay to near-zero value, leaving buyers with losses.

Most Bitcoin options buyers lose money because they overpay for rarely materialized volatility. High implied volatility, time decay, and the rarity of extreme moves stack the odds against them. While Bitcoin remains one of the most volatile major assets, the structure of its options market continues to favor disciplined volatility sellers over speculative buyers.

Miners prefer selling volatility over buying options because selling generates cash inflow, while buying options requires cash outflow (premiums paid). Given their capital-intensive operations and exposure to fluctuating Bitcoin prices, miners are structurally incentivized to monetize the volatility of their holdings rather than spend on expensive hedges. Unless a miner expects a major adverse price move, it makes more economic sense to sell volatility and collect consistent premiums, rather than buy protection that may expire worthless.

MicroStrategy, the largest corporate holder of Bitcoin, is well-known for its aggressive accumulation strategy. While the company remains fully exposed to Bitcoin’s price volatility, it actively sells volatility at the corporate financing level, using convertible bonds and equity issuance to monetize its stock’s market swings.

One of MicroStrategy’s primary financing methods has been the issuance of convertible bonds. Convertible bonds are debt instruments that allow bondholders to convert their bonds into MicroStrategy stock at a predetermined price. From the company’s perspective, issuing convertible debt is economically similar to selling a call option on its own stock, which trades at twice the value of its underlying Bitcoin holdings. In exchange for offering this upside potential to bondholders, MicroStrategy benefits by securing financing at significantly lower interest rates than traditional debt markets would otherwise offer. The embedded option gives bondholders the right to profit if MicroStrategy’s stock price rises sharply, meaning MicroStrategy is selling equity volatility in return for upfront capital.

Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.

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