The cryptocurrency derivatives market has entered one of its most dynamic phases in recent memory, according to a comprehensive new report from leading analytics firm Greeks.live. Their May 2025 crypto options review, released earlier this week, provides traders with a crucial roadmap for navigating what appears to be a transitional period for Bitcoin and Ethereum derivatives. The data reveals surprising shifts in institutional positioning and volatility expectations that could reshape trading strategies in the coming months.

One of the report’s most striking findings concerns the unusual behavior of implied volatility (IV) across major crypto assets. While Bitcoin’s 30-day IV has compressed to 45%—down from 68% during March’s market turbulence—Ethereum’s volatility expectations have remained stubbornly elevated at 58%. This 13-point spread between the two assets marks the widest divergence since the 2022 bear market and suggests traders anticipate Ethereum could experience more dramatic price swings in the near term.

“The options market is telling us something important about how traders view these assets differently,” explains Greeks.live research director Zhang Shuai. “Bitcoin is increasingly being treated as a macro asset moving in lockstep with traditional markets, while Ethereum’s price action remains driven by protocol-specific developments and the unpredictable timing of ETF approvals.”

This volatility dichotomy has created unusual opportunities for relative value trades. Several institutional desks have reportedly been selling Ethereum volatility while buying Bitcoin puts, essentially betting that ETH’s premium will eventually converge with BTC’s calmer expectations.

The report highlights a dramatic 40% month-over-month increase in total crypto options open interest, which now stands at a record $28 billion. But beneath this headline number lies a fascinating divergence in market participation.

Bitcoin options have seen their open interest become increasingly concentrated in longer-dated contracts, with the January 2026 expiry now accounting for 22% of all BTC options positions. This suggests institutions are using deep-out-of-the-money options as a cheap hedge against potential macroeconomic shocks later this year.

Ethereum tells the opposite story—over 60% of ETH options activity remains focused on front-month expiries, indicating traders are positioning for near-term catalysts like the anticipated VanEck spot ETF decision in late June. The data shows particularly heavy call buying at the $4,500 and $5,000 strike prices, revealing bullish sentiment among professional traders.

Perhaps the report’s most significant revelation concerns the changing nature of crypto options activity. For the first time, institutional-sized blocks (contracts worth over $1 million) now represent 38% of daily volume, up from just 19% in May 2024. This surge in professional participation has coincided with several notable developments:

CME Group’s Bitcoin options have quietly surpassed Deribit in open interest for contracts expiring beyond six months, a clear sign of traditional finance’s growing influence. The report notes that pension funds and commodity trading advisors appear to be using these regulated products to gain crypto exposure while avoiding balance sheet complications.

Meanwhile, the options skew—which measures the relative demand for puts versus calls—has turned positive for Bitcoin for the first time since 2021. This unusual situation where puts trade at a premium to calls typically indicates sophisticated investors are willing to pay up for downside protection, even as retail traders remain bullish.

The Greeks.live analysis sounds a cautious note about current gamma positioning across exchanges. With dealers estimated to be short $650 million worth of gamma across major strikes, the market has entered what professionals call a “negative gamma” environment. This creates conditions where price moves could become exaggerated as market makers are forced to dynamically hedge their exposures.

“We’re seeing the setup for potentially violent swings,” warns Zhang. “The combination of negative gamma, elevated but declining volatility, and concentrated open interest at key strike prices means traders should brace for turbulence, especially around monthly options expirations.”

The report identifies $65,000 as a critical gamma level for Bitcoin—a breach below this point could trigger accelerated selling as dealers adjust their hedges. For Ethereum, the $3,200 level serves as a similar inflection point that could determine whether we see a calm grind higher or a more dramatic repricing.

For options traders navigating these conditions, Greeks.live suggests several nuanced approaches:

Calendar spreads have become particularly attractive, with the report highlighting how traders can capitalize on the unusually steep volatility term structure by selling near-dated options and buying longer-dated ones. The analysis shows this strategy has produced positive returns in 12 of the past 15 weeks.

Another opportunity lies in volatility arbitrage between Bitcoin and Ethereum. With ETH’s implied volatility trading at such a premium to BTC’s, strategies that go long Bitcoin volatility while shorting Ethereum’s could benefit from eventual convergence.

Perhaps most importantly, the report emphasizes that traditional options strategies may need adjustment. “The old rules of buying calls during rallies and puts during selloffs don’t work as well in this new institutionalized market,” notes Zhang. “Traders need to account for how dealer hedging flows and gamma exposure will impact price action in ways we didn’t see in previous cycles.”

As the crypto market enters what’s historically been a seasonally slow period, the Greeks.live data suggests this summer could defy expectations. The combination of institutional participation, evolving volatility regimes, and growing options market sophistication points to a more complex trading environment than in years past.

For traders, the message is clear: understanding these derivatives dynamics has become non-negotiable. As Zhang puts it, “The crypto options market has grown up. Those still trading based solely on spot price charts are playing checkers while the pros are playing 3D chess.” With major macroeconomic events and regulatory decisions looming, the insights from this May 2025 options analysis may prove invaluable for navigating the turbulent waters ahead.