What Is Implied Volatility and Why Is It Typically Higher for Cryptocurrency Options?

Implied volatility (IV) is a forward-looking metric that represents the market's expectation of future price volatility for an underlying asset, as implied by the prices of its options. IV is typically higher for cryptocurrency options because cryptocurrencies like Bitcoin and Ethereum are inherently more volatile than traditional assets like stocks or bonds.

Their prices are subject to rapid and large swings due to regulatory news, technological developments, and shifts in market sentiment, and this uncertainty is reflected in higher option premiums and thus higher IV.