Understanding what a trader is: What Bitcoin and Ether's low-volatility markets suggest

What is the nature of traders, and what investment decisions are they currently making? There are clues to be read from the Bitcoin and Ethereum markets. Traders of both cryptocurrencies are exhibiting unusual investment behaviors, which suggest structural changes in the market.

Currently, BTC (Bitcoin) traders are focusing on low-volatility strategies in an environment where the 30-day implied volatility (IV) index has fallen to its lowest level in several months. Similarly, ETH (Ethereum) traders are also building defensive positions, and both cryptocurrencies are expecting market calmness.

Investment psychology seen from the current options market “What is a trader”

Options are derivative contracts that give buyers the right, but not the obligation, to buy or sell the underlying asset at a predetermined price at a specific future date. Call options grant the right to buy and indicate a bullish outlook on the market, while put options protect buyers from downside risks.

Traders are market participants who skillfully use these tools, and their trading behaviors often serve as leading indicators of market sentiment. When volatility is expected to decrease, traders typically sell both call and put options; when large fluctuations are anticipated, they tend to buy both.

Latest data shows that the annualized 30-day implied volatility of BTC, measured by Deribit’s DVOL index, has dropped to 40% over the past few months, the lowest since October. Such a decline indicates that fewer investors are expecting significant volatility.

Marcus Thielen, founder of 10x Research, points out, “From an options market perspective, this compression reflects a reduction in short-term uncertainty and suggests a higher likelihood of consolidation rather than major directional moves.” Last week’s options trading mainly involved selling calls and puts, with most of the nominal traded not being pure directional bets but related to volatility selling strategies.

In such market environments, traders are those who, despite multiple uncertainties such as geopolitical tensions and weak demand for US-listed Bitcoin ETFs, judge that the market will remain calm in the short term.

Market calmness indicated by Bitcoin and Ethereum implied volatility indices

BTC current price is $87.88K, with a 24-hour change of -1.66%. Even amid such market conditions, traders’ volatility expectations remain subdued.

According to TradingView data, the DVOL index peaked at 59% during the sell-off in November. The subsequent decline to 40% suggests that market participants are rapidly unwinding hedge contracts.

Similarly, Volme’x’s BTC volatility index BVIV also shows a significant decrease in expected volatility, vividly illustrating a shift in traders’ investment stance.

Ethereum’s implied volatility index, ETH DVOL, is now below 60%, reaching its lowest level since September 2024. This marks a sharp decline from the peak of 80.38 in November, clearly indicating that ETH traders are shifting from a defensive posture to an outlook of market tranquility.

ETH current price is $2.95K, with a 24-hour change of -2.69%. Although there is some minor correction, traders do not seem to anticipate further large fluctuations from here.

Background of the rapid narrowing of Ethereum volatility spread

Ethereum’s risk perception relative to Bitcoin has sharply decreased, indicating that traders are more quickly unwinding hedge trades in Ethereum’s native tokens.

The spread between the 30-day implied volatility indices of Ethereum and Bitcoin fell to 16 last week, the lowest since April 2025. Since August last year, when it peaked above 30, this significant narrowing over just a few months is noteworthy.

“The faster pace of decline in Ethereum’s volatility suggests that speculative or event-driven positions are being actively unwound, reinforcing a broad signal that short-term tail risks are not increasing but rather easing,” Thielen states.

Traders are those who are sensitive to such shifts in market psychology and adjust their positions accordingly. The volatility spread between ETH and BTC remains positive, and traders still expect ETH’s price fluctuations to be slightly larger than Bitcoin’s. Broadly speaking, both BTC and ETH are expected to stabilize, with ETH likely experiencing marginally greater volatility.

HYPE token and the volatility market in the crypto sector

Meanwhile, some sectors exhibit different volatility movements. The HYPE token recently dropped to $32.65, with a 24-hour change of -5.16%. This suggests that even in an environment of declining overall market volatility, individual tokens can still experience significant fluctuations.

Originally a perpetual futures exchange for cryptocurrencies, Hyperliquid expanded its business through the HIP-3 upgrade to include tokenized trading of stock indices, individual stocks, commodities, and major fiat currency pairs. Such platform expansion provides new trading opportunities for traders and influences the overall market volatility structure.

In such market environments, traders are flexible and multifaceted participants who, on a macro level, anticipate low volatility but also leverage higher volatility strategies in individual assets or specific sectors.