Block Scholes x Bybit Crypto Derivatives March 21 2025

Key insights

The broad-based decline in global asset prices was arrested this week, with crypto assets continuing their high correlation to US equities during a recovery. BTC is trading higher, above $85K, while ETH has recovered a key psychological level at $2K. Despite this, activity in derivatives markets has remained low. Funding rates for major tokens BTC, ETH and SOL have been consistently negative over this period. However, the demand for short-dated options, which was particularly strong in protection against further downside moves, has fallen alongside an end to the high level of realized volatility that has dominated markets over the past month.

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Perpetuals: Major tokens are expressing a strong demand for short exposure. Altcoin funding rates remain reactive to moves in spot prices.

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Options: The fall in realized volatility has caused BTC’s term structure to fall and ETH’s to disinvert after weeks of repeated rallies in demand for short-dated optionality.

Block Scholes BTC Senti-Meter Index

Block Scholes ETH Senti-Meter Index

Block Scholes’s 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

• US retail sales — Mar 17, 2025 — US retail sales rose by 0.2% after recording a −1.2% change in February, below the expected level of 0.6%.

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• Canada’s Consumer Price Index (CPI) — Mar 18, 2025 — Canada’s CPI rose to 2.6% in February, significantly surpassing the expected 2.1% and marking a sharp increase from 1.9% in January. The Bank of Canada's (BoC) core CPI also climbed to 2.7% YoY.

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• Bank of Japan (BOJ) interest rates — Mar 19, 2025 — The BOJ unanimously decided to keep interest rates (uncollateralized overnight call rate) steady at “around 0.5 percent,” stating that Japan's economy has recovered moderately, with some weakness.

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• US Fed monetary policy decision (FOMC) — Mar 19, 2025 — The FOMC decided to keep the federal funds rate unchanged at 4.50%. 

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• Bank of England’s (BoE) interest rate — Mar 20, 2025 — The BoE is expected to hold the benchmark interest rate at 4.5%, as rising energy costs are expected to temporarily push inflation up to 3.7% this year.

Fed funds rate — Markets are pricing in more rate cuts than this time last month, with a rate range of 3.75%–4.00% the most likely by year-end. Fed Chair Jerome Powell has emphasized patience, as the FOMC seeks clarity on economic conditions and trade policies.

Trending news

• A new Ethereum testnet, Hoodi, was launched this Monday, replacing Holesky as part of the network’s ongoing advancements. The Pectra upgrade is scheduled to activate on Hoodi by March 26, with the official mainnet fork anticipated to occur by mid-May 2025.
• Xapo Bank has launched a new initiative that offers Bitcoin-backed loans of up to $1 million. This move positions the bank within the expanding crypto-lending sector, and aims to provide an alternative to what Xapo Bank terms as “predatory” lending practices prevalent in the industry.

BTC and ETH see demand for short exposure

Key insights

Despite the past week delivering a lower level of realized volatility and a more positive performance across major crypto assets, funding rates for BTC, ETH and even SOL have almost constantly been negative. This means that short positions must pay long positions for their long exposure, and is usually an indication of bearish sentiment. The negative sentiment has been less universal across large-capitalization altcoins. Altcoin funding rates have, varied from positive to negative across the past two weeks and have not expressed a singularly strong directional sentiment.

BTC options

Key insights

A quieter spot market is being matched by a calmer options market. The resulting lower level of realized volatility hasn’t caused BTC’s term structure of at-the-money implied volatility to return to an upward-sloping shape, as it has with ETH’s term structure, but short-dated volatility has nevertheless fallen. The past week‘s reprieve from the sell-off that has now lasted more than a month has seen option markets settle and caused a distinctly sharp fall in the demand for short-dated protective put buying.

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BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

BTC’s term structure has flattened

BYBIT BTC ATM TERM STRUCTURE — The term structure of at-the-money trades is flat after several weeks of repeated inversion.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — Implied volatility levels are trading between 45% and 50% at all tenors shorter than two months.

BYBIT BTC IMPLIED AND REALIZED VOLATILITY — A sustained period of high realized volatility has come to an end over the past week of activity.

ETH options

Key insights

A lower realized volatility in ETH’s spot price has seen a disinversion of the at-the-money implied volatility term structure and, with it, a drift lower in volatility expectations across the term structure. However, activity in options is far lower than at the end of February, with a smaller but consistent level of open interest in longer-dated expirations supplemented by the rollover of expired weekly contracts. Call options remain in higher demand than puts, as ETH’s spot price has rallied to regain the key psychological level of $2K.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

Lower realized volatility results in disinversion

BYBIT ETH VOLATILITY TERM STRUCTURE — The disinversion of the term structure is complete, with front-end volatility nearly 20 points lower.

BYBIT ETH SVI ATM IMPLIED VOLATILITY — Implied volatility at all tenors has drifted lower following the disinversion of the term structure.

BYBIT ETH IMPLIED AND REALIZED VOLATILITY — A relatively lower level of realized volatility in the spot market has seen implied volatility drift slightly lower.

Volatility by exchange

BTC, 1-MONTH TENOR, SVI CALIBRATION

ETH, 1-MONTH TENOR, SVI CALIBRATION

Bybit volatility surface

Data & Methodology

Data Acquisition, Composition & Timeline

Open interest and trading volume data are sourced “as is” from the Bybit exchange platform API exclusively, and as such do not represent a comprehensive picture of the sum of trading activity across all derivatives markets or exchanges. The data visualized in this report consists of hourly and daily snapshots, recorded over the previous 30 days. Daily (hourly) snapshots of trade volume record the total sum of the notional value of trades recorded in the 24H (1 hour) period, beginning with the snapshot timestamp.

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If not explicitly labeled as derived from another exchange, the input instrument prices to all derivatives analytics metrics in this report are sourced from the appropriate endpoints of Bybit’s public exchange platform API. In the event that data is labeled or referred to as representing the market on another exchange source, that data is sourced from the appropriate endpoint of each respective exchange’s public API.

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Macroeconomic charts and data are sourced “as is” from the Bloomberg Terminal. Exchange data is sourced “as is” from publicly available exchange APIs. Block Scholes makes no claims about the veracity of public third-party data.

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Open Interest & Volume Dollar Denomination

After acquisition of underlying-denominated raw data for open interest and trading volume on the Bybit exchange platform from Bybit’s API endpoint, equivalent dollar-denominated figures are calculated using the concurrent value of Block Scholes’s Spot Index for the relevant underlying asset.

Block Scholes’s Spot Index represents the aggregate Spot mid-price for a given currency across the top five CEXs by volume (with USD-quoted markets). It considers the proportion of total volume in the instrument on the exchange, as well as the deviation of a data point from those on other exchanges.

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Block Scholes–Derived Analytics Metrics

Futures prices are used for Block Scholes’s futures-implied yields calculation services in order to derive the constant-tenor annualized yields displayed in the Futures section of this report.

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Options prices are used for Block Scholes’s implied volatility calculation services in order to calibrate volatility surfaces, from which all derivatives volatility analytics displayed in the BTC Options and ETH Options sections of this report are calculated. Volatility smiles are constructed by calibrating to mid-market prices observed in Bybit options markets. As part of the calibration process, prices go through rigorous filtration and cleaning steps, which ensures that the resulting volatility surface is arbitrage-free and has exceptional fit to the market observables.