Block Scholes x Bybit Crypto Derivatives January 24th 2025

Key Insights

Trump’s inauguration on Jan 20, 2025 was preceded by the launch of two Trump family meme coins, TRUMP and MELANIA, which quickly amassed billions of dollars in market capitalization. However, the rumors that a strategic Bitcoin reserve would be among the flurry of executive orders signed by Trump on day one of his administration are what saw derivatives markets positioning shift strongly toward a bullish outcome — inverting the term structure of volatility, raising funding rates levied on long positions and tilting short-tenor volatility smiles toward calls. When that bullish outcome wasn’t delivered, implied volatility levels fell, despite a pickup in realized volatility. However, the bullish skew toward OTM calls remained.

Perpetuals: A consistently high funding rate applied to almost all markets has persisted beyond the inauguration event.

Options: Realized volatility spiked toward post-election highs, despite a fall in implied volatility levels, as a result of an overestimated inauguration day for crypto. Positioning remains bullishly tilted at all tenors.

Block Scholes BTC Senti-Meter Index

Block Scholes ETH Senti-Meter Index

Block Scholes’ Senti-Meter index aggregates the funding rate, future-implied yield, and volatility smile skew into a single expression of sentiment in derivatives markets — see more in the methodology article here.

Macro, Tech & Regs

Macro Calendar & Recent Events

• China GDP — Jan 17, 2025 — Annualized Q4 GDP in China was 5.4%, pushing the country to meet its 5% yearly GDP target, evidence that fiscal and monetary stimulus in are showing early signs of positive transmission.

• President Trump Inauguration Speech — Jan 21, 2025 — President Trump fell short of announcing any tariffs during his inauguration speech, which brought temporary relief for various foreign currencies, such as the euro, CNY and GBP, against the dollar.

• Japan CPI — Jan 23, 2025 — CPI in Japan is expected to have ticked up from 2.7% in November 2024 to 3% in December 2024, year-over-year.

• Bank of Japan (BoJ) Interest Rate Decision — Jan 24, 2025 — The BoJ is likely to raise interest rates by 25 bps from its current rate of 0.25%, with current market expectations at 97%. This will be the first hike since July 2024, when the BoJ announced the move unexpectedly and rattled markets amid a shakier U.S. jobs market backdrop as well.

• S&P Flash PMI January — Jan 24, 2025 — The first set of flash Purchasing Manager Index (PMI) data for 2025 will be released for the U.S., U.K., eurozone and other major regions. This will capture the economic conditions in each of these regions since the New Year.

BTC New ATH — BTC rallied to a new high of $109K, alongside a rally in Polymarket-implied odds that “Trump [will] create a Bitcoin reserve within his first 100 days.”

Trending News

• The SEC has announced a new cryptocurrency-dedicated task force, intended to “set the SEC on a sensible regulatory path that respects the bounds of the law” when it comes to regulating digital assets.
• President Trump and First Lady Melania Trump both launched their crypto tokens, $TRUMP and $MELANIA, with the $TRUMP token reaching an all-time high of $73 and currently trading at $42.

Solana Activity Spikes Following $TRUMP Launch

The inauguration weekend saw the highest perpetual swap trade volumes in over a month, as traders took positions ahead of an anticipated slew of crypto-positive executive orders. However, it was SOLUSDT perps that enjoyed a particularly large increase in activity, as the token recorded new all-time highs (as well as a significant spike in its realized volatility). Trump’s launch of a meme coin ($TRUMP) in the days before the event on Solana DEXs saw the network outpace smart contract–platform competitors in fee generation. More symbolic was the choice of a sitting U.S. president to launch a meme coin on Solana rather than Ethereum.

Bybit Perp Open Interest — Despite higher realized volatility and increased trading volumes, open interest levels in BTC and ETH remain consistent.

Bybit Perp Trading Volumes — The weekend of the inauguration saw the highest trade volumes in over a month, with SOLUSDT enjoying a particularly large increase.

Funding Rates Positive Despite Spot Volatility

Perpetual swap funding rates experienced little of the repricing that we saw in volatility as inauguration day came and went without a significant announcement or executive order. Instead, funding rates across all coins remained at neutral-to-bullish levels. As indicated by open interest data, markets displayed no significant opening or closing of open positions, despite the spot price volatility. Therefore, despite options markets moderating expectations for the very short term, sentiment across derivatives markets appears to have treated the disappointing passing of inauguration day as just one chance of many for positive news for the industry.

BTC Options

Bets that the incoming president would announce a strategic Bitcoin reserve in his inaugural speech caused a buildup of short-tenor options positioning in the days and hours ahead of the event. As a result, options markets saw a significant and sustained increase in call buying, and the strongest inversion of the at-the-money term structure since the election on Nov 5, 2024. The relatively extreme pricing of front-end volatility has dissipated, but the strong skew toward OTM calls hasn’t, indicating a continued preference for upside exposure now that Trump is able to put pen to paper on executive orders.

BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

Volatility Expectations Were Disappointed

BYBIT BTC ATM TERM STRUCTURE — The term structure has completed a round trip to a slightly steep shape following the inauguration.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — Volatility across the term structure trended down following the inauguration, while the inversion resolved to a steep shape.

BYBIT BTC IMPLIED AND REALIZED VOLATILITY — Realized volatility levels hit their highest levels (even before the election) during the disinversion.

ETH Options

While ETH has largely underperformed BTC since the election, it too enjoyed a spike in bullish positioning ahead of the inauguration. However, the choice of the Trump family to launch two meme coins on DEXs on rival blockchain Solana was likely at least part of the reason that we saw increased activity in put trading over the weekend. Nevertheless, volatility smiles remain skewed toward OTM calls (albeit less extreme than for BTC), and open interest reflects a net bullish position of the market.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

Implied Volatility Falls, Realized Volatility Spikes

BYBIT ETH VOLATILITY TERM STRUCTURE — The term structure is flat at the front end, as it was last week, while longer-tenor volatility has repriced lower.

BYBIT ETH SVI ATM IMPLIED VOLATILITY —  The inversion of the term structure only flattened following a disappointing inaugural speech.

BYBIT ETH IMPLIED AND REALIZED VOLATILITY — Price action around the inauguration delivered a much higher level of volatility than is now priced in by options.

SOL Options Activity Explodes

The extreme spike in SOL’s realized volatility came alongside a sustained increase in trading volumes of options contracts. The activity was broadly balanced between both calls and puts, likely indicating a mix of both leveraged long positions and some protective put buying as SOL recorded a new all-time high of $293. The result of that flurry of trading activity is a substantial increase in open interest, that now surpasses the level of open interest immediately before December’s end-of-year expiration event. Open interest in calls slightly edges out that of puts, with positioning dominated by mid-tenor contracts.

BYBIT SOL OPTIONS VOLUMES

BYBIT SOL OPTIONS OPEN INTEREST

SOL Realized Volatility in Context

SOL’s recent grab at a new all-time high has come alongside significant realized volatility that sees it move with higher choppiness than its peers. However, while it is the most recent token to enjoy an “ATH” headline, SOL is not the best post-election performer. That title is claimed by XRP, which towers above each of BTC, ETH, and SOL having recorded a 6x multiple. This incredible performance was responsible for the drawdown in Bitcoin dominance in late November, rather than a broad-based altcoin rally. SOL’s recent realized volatility also pales to XRP’s early-December highs.

Volatility Falls but Skew Remains

President Trump’s inauguration on Jan 20, 2025 saw a sharp reversal in the previously bearish sentiment at short tenors. The launch of two Trump family meme coins, and speculation that his inaugural speech would contain a reference to a strategic Bitcoin reserve, saw markets take significant positions ahead of the event. However, while outright volatility levels at the front end of the term structure repriced lower, the bullish skew toward OTM calls that had been priced remained. Volatility smiles at all tenors assign a 5–10 point premium to OTM call options.

BYBIT BTC 25-delta call-put skew

BYBIT ETH 25-delta call-put skew

Volatility by Exchange

BTC, 1-MONTH TENOR, SVI CALIBRATION

ETH, 1-MONTH TENOR, SVI CALIBRATION

Bybit Volatility Surfaces

Constant Maturity Smiles