May 2023 Crypto Volatility: Implied, Realised, and Relative BTC–ETH Levels

Summary

This market review examines the decline in Bitcoin and Ether volatility through May 2023. It compares one-month at-the-money option implied volatility with realised volatility calculated from hourly returns, and relates both measures to spot trading volume. The article reports that implied and realised volatility were near the lowest levels in the available period, while spot volume had also fallen. Historical plots show implied volatility generally moving with realised volatility and trading activity, though the relationship weakens at higher realised volatility.

The review also highlights an unusual relative pattern: Ether implied volatility was below Bitcoin’s over the near end of the term structure even though Ether had recently shown higher realised volatility. Historical comparisons suggest this could reverse if volatility rises, but the article also raises the possibility that Ethereum network changes have altered the relationship. The analysis is descriptive and based on historical market data; it does not establish causation, identify whether retail or institutional activity drove volume changes, or provide a forecast.

Key ideas

• The review reports unusually low BTC and ETH option implied volatility alongside low realised volatility.
• Implied volatility historically tracks realised volatility, although the relationship becomes less strong at higher realised levels.
• Spot trading volume has tended to rise around large price moves and fall during quieter periods.
• ETH implied volatility was unusually below BTC implied volatility despite ETH’s higher recent realised volatility.
• The historical ETH–BTC relationship may change as Ethereum’s network evolves.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.