Volatility comes from uncertainty. That is going to remain high. Which means if I hold Bitcoin there is the chance that I will wake up tomorrow losing 50% of the value. But insurance for that decline is to expensive. Perhaps one could create different kinds of insurance or transfer mechanisms which mitigates that risk.
That's what options are and there are pricing models that take into account high volatility accordingly. I call them 'insurance' because that's how I see them after learning and working with them. They are simply a transfer of risk from one party to another; the buyer of the option is selling their risk, the seller is taking it on for a period of time with certain conditions. The 'option' part is whether they are exercised, just like when you buy fire insurance (a risk you don't want to have) and your house doesn't burn down, the insurance seller is ahead and your risk as the buyer is reduced or eliminated. There is also the problem of determining how much risk the option seller can take on and handle before falling over when they have to pay up, but I'm sure there's also options available to mitigate that risk as well; it's turtles all the way down.
