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Bybit and Block Scholes Report: The Surge of ETH-BTC Volatility in 2025

In a recent report by Bybit, the world's second-largest cryptocurrency exchange, a significant shift in volatility dynamics between Ethereum (ETH) and Bitcoin (BTC) has been unveiled. The research, conducted in collaboration with Block Scholes, has captured the market's attention, showing that the ETH-BTC volatility has reached levels not seen in five years.

Historic Volatility Divergence in May 2025

During the month of May 2025, ETH options displayed an unprecedented increase in volatility premiums over BTC. This was primarily attributed to ETH's surging realized volatility during a robust price rally that captured investor interest. The report highlights several key metrics:

• - The ETH-to-BTC implied volatility ratio for short-dated options surged past 2x, marking a five-year peak.
• - Simultaneously, BTC's realized volatility experienced a significant drop, falling below a long-standing 35% threshold—an indicator that denoted a 19-month-long trend.
• - The volatility structure for ETH displayed a consistent inversion, meaning that shorter-dated options reflected higher volatility compared to long-term ones.

The divergence in implied volatility trends coincided with ETH's remarkable price performance, which included a substantial 23% intraday rally during critical market events.

Implied Volatility Expansion

In early May, the ETH-to-BTC implied volatility ratio for 7-day options was around 1.5, indicating that options on ETH were priced with a 50% higher expected volatility than those on BTC. However, by May 16, this ratio soared above 2x, reaching heights unseen since 2020. This increase occurred as BTC's implied volatility declined, hitting its lowest point since October 2023, breaking the notable 35% barrier that had provided support for over a year and a half.

The volatility spread was particularly emphasized in the 30-day tenor, reaching its widest since mid-2022. This showcased a clear trend indicating that while ETH gained momentum, BTC was losing its volatility traction.

Realized Volatility Trends Support Divergence

The divergence in implied volatility metrics was supplemented by trends observed in realized volatility, a crucial measure reflecting actual historical price movements. Throughout May, ETH's realized volatility consistently outperformed BTC across various time frames, suggesting market expectations were leaning towards sustained volatility disparities between the two cryptocurrencies. On May 15, the 7-day realized volatility ratio between ETH and BTC peaked alongside the implied volatility ratio.

This trend has not appeared overnight; the ETH-BTC volatility ratio has steadily climbed since July 2024, amidst market fluctuations and bull runs.

Factors Influencing ETH's Performance

Several underlying factors contributed to ETH's exceptional performance during May 2025. Among them, favorable US-UK trade news served as a catalyst for this growth. For instance, on May 8th alone, ETH surged more than 23%, contrasting with BTC’s more modest gain of around 10% during the same timeframe. Despite this impressive rally, ETH remains over 50% below its peak achieved in January 2025, highlighting the volatile nature of cryptocurrency markets.

Conclusion

The report underscores the dynamic and often unpredictable nature of cryptocurrency markets. As Bybit continues to monitor these fluctuations, traders and investors alike must stay alert to potential changes in market conditions. The rise in ETH’s volatility relative to BTC presents both opportunities and risks, signifying a new era of trading strategies for cryptocurrency assets.

To stay informed about the latest developments, visit Bybit.com and explore their insights into the evolving landscape of cryptocurrency trading.

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