Block Scholes x Bybit Crypto Derivatives October 2nd

Key Insights

Futures: The expiration of the September-end quarterly contract saw open interest fall significantly as many traders didn’t reopen their positions.

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Perpetuals: A positive funding rate across markets belies the drop in open interest during spot price volatility at the end of September.

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Options: The U.S. presidential election continues to dominate narratives and market positioning, as ETH implied volatility is trading 10 points above BTC across the term structure, while the realized volatility of the two major cryptos trends lower.

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Block Scholes BTC Senti-Meter Index

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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

• Euro Area Annual Inflation — Oct 1, 2024 — Annual inflation in the Euro area is estimated to have fallen to 1.8% in September 2024, down from 2.2% in August.

• JOLTS — Oct 1, 2024 — The number of total job openings increased to 8.04 million, above expectations of 7.67 million and the highest mark in three months.

• PBoC — Sep 24, 2024 — The PBoC announced a broad stimulus package to reignite its economy, including key interest rate cuts.

• Employment Situation Report — Oct 4, 2024 — The US economy is expected to add 150,000 nonfarm payroll jobs in Sep, with the unemployment rate remaining at 4.2%. This will be taken as a sign that there is no imminent downturn in the economy.

• NABE Annual Meeting Nashville — Sep 30, 2024 — Jerome Powell confirmed the Fed isn’t on any “preset course” in regard to the pace and depth of rate cuts, continuing to be data-driven, meeting by meeting.

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Global liquidity is on the rise as major central banks are all cutting interest rates simultaneously.

Trending News

• A court hearing scheduled for October 7, 2024 will approve the restructuring plan of bankrupt crypto exchange FTX and confirm repayments to creditors.

• Geopolitical tensions in the Middle East have increased following the launch of Iranian missiles toward Israel, coinciding with a sell-off in crypto spot prices and equities.

September Expiration Sees High Trade Volumes

Spot price volatility near the end-of-September futures expiration on Sep 27, 2024 saw the highest trade volumes in futures contracts in more than a month. This activity was heavily concentrated in BTC contracts, continuing a pattern that we’ve observed for much of the market’s recent history. The expiration of a significant quarterly contract at the end of September resulted in a net loss in open interest levels, as not all traders chose to roll their positions over to later expirations. This means that futures activity remains much lower than that in perpetual swap markets.

Bybit Futures Swap Open Interest

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Bybit Futures Trading Volumes

Perps Impacted By Spot Price Volatility

Although the expiration of the September contract saw a large drop in futures open interest, the impact on perpetual swap contract markets was relatively muted. While we did see a drop in perp open interest at the end of the month, this is more likely attributable to the closure of long positions, as spot price levels dipped back toward the bottom of their recent range. However, this marks the halt of an upward trend in open interest toward all-time high levels and not a significant fall. This is despite the highest trade volumes for the month being recorded on Oct 1, 2024.

Bybit Perp BTC & ETH Open Interest — Open interest fell during spot price volatility, but remains close to all-time high levels.

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Bybit Perp Trading Volumes — Trade volumes hit their highest levels for the month on Oct 1, 2024. 

Several Perps Report Positive Funding Rates

Funding rates across perpetual swap contracts have reported a positive value paid from longs to shorts over the last few days, indicating broad-based bullish sentiment. TON remains a notable exception to this trend, despite a short-lived flip to a positive rate in the last month. In particular, DOGE has enjoyed a consistently positive funding rate alongside a wider bullish sentiment in meme coins.

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BTC Options

Positioning in BTC options markets continues to be dominated by the U.S. election narrative. This shows up most prominently on the term structure, which prices for a much higher level of volatility expectations following the election, with short-tenor optionality trading much lower. The increased level of implied volatility at these tenors is at odds with the levels delivered within the recent past, which have trailed down to month-long lows as the spot price has remained relatively range-bound. Trade volumes over the past week have reflected the changing sentiment, with similar levels of movement in both puts and calls, but neither trade volumes nor open interest levels have managed to outperform recent levels — just as the BTC spot price remains range-bound, despite swaying in the macroeconomic wind.

BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

The Term Structure Kink Moves Closer

BYBIT BTC & ETH Volatility Term Structure — The volatility kink resulting from the U.S. election event risk has traveled along the term structure while maintaining its level.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — Long- and short-tenor volatility levels remain relatively stable, while tenors close to the election pass across the dislocation.

BYBIT BTC IMPLIED AND REALIZED VOLATILITY —  While the election premium has moved the 30-day volatility level higher, recently realized volatility has reached month-long lows.

ETH Options

ETH options recorded large trade volumes in puts on Oct 1, 2024. However, this did not translate to a higher open interest in puts as a result. In fact, open interest suffered strongly in both puts and calls following the expiration of the quarterly contract, as traders didn’t reopen expired positions. While expressing the same election premium observed for BTC, ETH volatility trades around 10 points higher at all tenors. In addition, ETH short-tenor volatility has outperformed that of BTC over the past week.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

ETH Volatility Trades Above BTC Volatility

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BYBIT ETH VOLATILITY TERM STRUCTURE — While expressing the same election premium, ETH volatility is trading about 10 points higher at all tenors

BYBIT ETH SVI ATM IMPLIED VOLATILITY — Short-tenor volatility has outperformed that of BTC over the past week.

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BYBIT ETH IMPLIED AND REALIZED VOLATILITY — The spread of U.S. election volatility levels above recently realized levels has grown by over 10 points.

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

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