KEY TAKEAWAYS
- Bybit and Block Scholes report a historic divergence in volatility between Ethereum and Bitcoin options in May 2025.
- ETH options exhibited significantly higher volatility premiums compared to BTC, with the ETH-to-BTC implied volatility ratio reaching a five-year high.
- Realized volatility trends further underscore the divergence, with ETH’s volatility outpacing BTC’s across various tenors.
- ETH’s performance was bolstered by positive trade news, leading to a 23% surge in a single day, despite remaining below its January 2025 peak.
Bybit, the world’s second-largest cryptocurrency exchange by trading volume, in collaboration with Block Scholes, has released a new options volatility report. The report highlights a significant divergence in volatility between Ethereum (ETH) and Bitcoin (BTC) during May 2025. This divergence marks a historic moment in the cryptocurrency market, as ETH options exhibited higher volatility premiums compared to BTC.
ETH-to-BTC Implied Volatility Expands to Five-Year High
In May 2025, a notable dislocation in implied volatility emerged between ETH and BTC options. Implied volatility reflects market expectations for future price movements over an option’s lifespan. At the beginning of the month, the ETH-to-BTC implied volatility ratio for 7-day options was around 1.5, indicating that ETH options were priced with 50% higher expected volatility than BTC options.
By May 16, this ratio surged past 2x, reaching levels not seen since 2020. This increase coincided with a decline in BTC’s implied volatility to its lowest levels since October 2023, breaking a 19-month trend of maintaining a 35% floor. Meanwhile, ETH’s short-tenor implied volatility remained elevated, though slightly below its peak on May 10. The volatility spread was particularly pronounced in the 30-day tenor, reaching its widest point since mid-2022.
Realized Volatility Trends Underscore the Divergence
The sharp divergence in implied volatility was further reinforced by trends in realized volatility, which measures actual historical price movement. In May, ETH’s realized volatility significantly outpaced BTC’s across various tenors, fueling expectations for continued dispersion between the two assets.
On May 15, the 7-day realized volatility ratio between ETH and BTC peaked, closely followed by the implied volatility ratio. This suggests that market participants expected ETH’s higher volatility to persist. This trend has been ongoing since July 2024, amid both bull runs and periods of market stress.
ETH’s standout performance in May was driven by several factors, including positive US-UK trade news. On May 8, ETH surged more than 23% in a single day, continuing to outperform BTC, which gained approximately 10% during the same period. Despite this momentum, ETH remained over 50% below its January 2025 peak and its all-time high.
The full report can be accessed here.
Why This Matters: Impact, Industry Trends & Expert Insights
The recent report by Bybit and Block Scholes highlights a significant divergence in volatility between Ethereum (ETH) and Bitcoin (BTC) options, reaching levels not seen in five years. This development underscores a pivotal moment in the cryptocurrency market.
A CoinDesk report highlights the growing disparity in volatility expectations between ETH and BTC, with ETH’s implied volatility reaching its highest level since the FTX crash. This trend is evident as ETH’s options are trading at a higher premium compared to BTC, reflecting larger expected price swings. This aligns with the reported surge in ETH-to-BTC implied volatility ratios, marking a five-year high.
Insights from Pepperstone emphasize that the divergence in volatility is driven by ETH’s elevated realized volatility during a significant price rally. This reinforces the market’s expectation of continued high volatility for ETH relative to BTC, as observed in the report’s findings.
Explore More News:
Disclaimer: The views expressed in this article are those of the authors and do not necessarily reflect the official policy of CoinsHolder. Content, including that generated with the help of AI, is for informational purposes only and is not intended as legal, financial, or professional advice. Readers should do their research before taking any actions related to the company and carry full responsibility for their decisions.
