Block Scholes x Bybit Crypto Derivatives November 20th

Key Insights

Futures: Futures open interest has surged, reflecting increased market participation and a growing appetite for leveraged exposure amid recent price movements.

Perpetuals: Perpetuals open interest has risen sharply, driven by increased trader confidence and a growing demand for leveraged positions in response to recent market rallies.

Options: Implied volatility term structure continues to invert in lockstep with spot price rallies, indicative of continued spot-volatility correlation.

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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 ‍

• U.S. CPI – Nov 13, 2024 – U.S. inflation came in at expectations, with the headline CPI rising to 2.6% year-over-year. Overall, the report showed stalling disinflation, which will influence the path of rate cuts.

• Jerome Powell Speech – Nov 14, 2024 – Fed Chair Powell stated there’s no “need to be in a hurry to lower rates” based on current economic data. Trump Trades, including BTC, pulled back on the news, as risk-on assets tend to perform better in a higher liquidity environment.

• U.S. Retail Sales – Nov 15, 2024 – Monthly retail sales in the U.S. for October grew 0.4%, with the September figure revised upward from 0.4% to 0.8%. This underscores the continued resilience of the U.S. economy.

• Euro Area Inflation – Nov 19, 2024 – The annual inflation rate in the Euro Area was 2.0% in October 2024, up from 1.7% in September. This was in line with ECB projections of a slight uptick, and markets still expect a third consecutive rate cut from the upcoming December meeting.

• S&P PMI – Nov 22, 2024 – The PMI report is expected to give further insight into the manufacturing and services sector in the U.S. Better-than-expected data may result in a further pullback in expectations for a December rate cut by the Fed.

Bitcoin Spot Price & Bitcoin Mining Stocks — BTC Mining stocks have largely given up their post-election gains amid higher spot prices and increasing network difficulty.

Trending News

• Trump Media & Technology Group has reportedly moved to acquire Bakkt, a custody service for cold storage of BTC. This would be another move to illustrate Trump’s support for the crypto industry, given his sizable ownership in the company.
• Options contracts on BlackRock’s Spot Bitcoin ETF, IBIT, launched on Nov 19, 2024, and saw 354,000 contracts traded. Of these, 289,000 were call options, and total volume amounted to $1.9 billion.

Futures Open Interest Hits Record Levels

There’s been a notable surge in futures open interest to the highest levels on record, suggesting that market participants are seeking leveraged exposure due to recent spot price movements. While BTC continues to dominate the landscape, ETH’s short-tenor futures have also seen a significant increase. This rise contrasts with pre-election levels, indicating that a known event risk resulted in lower levels of positioning than its resulting rally. Additionally, trade volumes have risen in tandem with open interest, further signaling increased market activity. ETH’s futures saw a noticeable rise in activity, with trading volumes higher than usual.

Bybit Futures Swap Open Interest

Bybit Futures Trading Volumes

Perp Open Interest Hits Highs

Perpetual swap open interest has been rising at the same time as futures, with a steady increase in open positions observed over the past week to hit all-time high levels of activity. This trend indicates that traders are actively seeking leveraged exposure in light of the ongoing spot rallies, seeking exposure to the move higher in spot price. Notably, activity has shown renewed interest in Ethereum, as evidenced by rising trading volumes. While trading activity has been higher in the weeks following the election, suggesting that market participants are still expressing their market view through ETH, the spotlight remains on BTC.

Bybit Perp BTC & ETH Open Interest — Open positions have been rising steadily to all-time high levels during the post-election rally.

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Bybit Perp Trading Volumes — Perpetuals trading volumes has increased significantly since the election, with significantly higher activity in ETH contracts.

Funding Rates Extremely Bullish

Perpetual swap funding rates have registered exceptionally positive values, signaling that long positions are highly confident in paying the rates to maintain their leveraged exposure. This trend has been consistently observed across all tokens, with a significant increase in funding rates since November 10, 2024. These continuously high levels underscore the strength of the bullish sentiment, also observed in futures contracts given the growing open interest, and align with the recent spot price action, which has been showing significant upward momentum.

BTC Options

BTC implied volatility term structure inverted amid the recent spot rallies of the past few weeks, reflecting increased market uncertainty and expectations of immediate price movements. However, levels haven’t broken past the highs registered pre-election, and longer-dated tenors remain stubbornly range-bound. At the same time, open interest for BTC options has risen significantly, with a marked increase in put trading volumes. In fact, puts open interest has now slightly surpassed calls open interest, despite the stubbornly bullish market outlook expressed by the volatility smile skew.

BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

BTC Volatility Moves Range-Bound

BYBIT BTC & ETH Volatility Term Structure — The term structure has flattened again, with levels of inversion following moves higher in spot prices.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — Implied volatility levels have recently shown range-bound activity, inverting in tandem with spot price upward movements.

BYBIT BTC IMPLIED AND REALIZED VOLATILITY —BTC’s realized volume has increased dramatically since the election throughout the bullish rally.

ETH Options

ETH’s implied volatility term structure reached pre-election highs on Nov 12, 2024, but since then has followed a range-bound pattern similar to that of BTC’s volatility. The inversion of levels has displayed an oscillating behavior much like BTC’s, with the term structure flattening and then re-inverting in tandem with spot price movements. In contrast, trading volumes have seen a significant uptick over the past few weeks, particularly for calls (unlike BTC). Open interest also increased around Nov 10, and has since remained constant.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

ETH Volatility Term Structure Flattens

BYBIT ETH VOLATILITY TERM STRUCTURE — The term structure has flattened over the past 7 days, without the same inversion seen in BTC’s term structure.

BYBIT ETH SVI ATM IMPLIED VOLATILITY — Following the spike on Nov 12, 2024, the term structure has been mostly inverted, mirroring BTC’s activity.

BYBIT ETH IMPLIED AND REALIZED VOLATILITY — ETH’s realized volatility has surged and fallen dramatically, while 30D tenor volatility has trended sideways.

Volatility by Exchange

BTC, 1-Month Tenor, SVI Calibration

ETH, 1-Month Tenor, SVI Calibration

Bybit Volatility Surface

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Listed Expiry Volatility Smiles