Where, Oh Where Has Bitcoin Volatility Gone? Part 1
During this time, both BTC and stocks were experiencing extreme volatility, and this uncertainty was priced into the options markets for both. As realized volatility drops, investors get comfortable because they do not anticipate anything crazy happening in the market in the near term and become more willing to sell options.
As they sell more and more options, market-makers accumulate long gamma positions and subsequently lower implied volatility in their pricing models. This act of gamma hedging, in the absence of other external factors (such as big news or a large influx of investors jumping into or out of the crypto markets), creates a dampening effect on volatility.