Block Scholes x Bybit Crypto Derivatives September 25th

Key Insights

Futures: Futures markets are not showing drastic movements in open interest, but have recorded decreasing levels of trading volumes. 

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Perpetuals: Open Interest has moved sideways in recent weeks, showing widespread consistent levels of trading volumes, except over the weekend, when activity is lower than usual.

Options: The term structure of ATM implied volatility remains at high levels for long tenors, while levels are oscillating for short-dated tenors, which currently trade lower than last week.

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

• FOMC Meeting — Sep 18, 2024 — The Fed cut interest rates by 0.5% to recalibrate monetary policy and maintain strength in the labor market.
• S&P Global U.S. Composite PMI — Sep 23, 2024 — The headline S&P Global Flash US PMI Composite Output Index, which distinguishes between growth and contraction in the economy. registered 54.4 in September, down slightly from 54.6 in August but still above 50.
• Bank of Japan (BoJ) Meeting — Sep 20, 2024 — The BoJ kept its short-term rate at 0.25%, in line with expectations.
• Bank of England (BoE) Meeting — Sep, 19, 2024 — The BoE held interest rates at 5% amid continued sticky services price inflation, which rose from 5.2% to 5.6% in August.
• GDPNow Federal Reserve Bank of Atlanta — Sep, 18, 2024 — The Atlanta Fed’s GDPNow model revised the annual Q3 growth rate in the U.S. to 2.9%, down from 3.0%.

U.S. Personal Consumption Expenditures (PCE) — The PCE Index is expected to show headline prices rising 2.3%, with core prices rising 2.7% over the 12 months ending in August.

Trending News

• Europe’s September PMI shows fragile growth prospects, especially in Germany, where the Composite PMI fell from 48.4 in August to 47.2, the lowest reading since February 2024.
• Spot BTC ETFs have registered daily net inflows every day, following a net outflow of $52.7 million on Sep 18, 2024.

Futures Trading Volumes Declining

Trade volumes for futures show an overall decline in the past few weeks, going from high levels ranging between $16M–$20M in early September to low levels over the past few days, reaching around $6.7M. Futures open interest, on the other hand, shows overall consistent levels and sideways movement, with BTC levels higher compared to ETH across all tenors. These key factors combined show that traders are holding on to their positions, especially in longer dated expirations.

Bybit Futures Swap Open Interest

Bybit Futures Trading Volumes

Perp Activity Is Consistent

Perpetual swap open interest has registered range-bound and limited sudden movement. While slightly lower at the beginning of September, it has now matched previous higher levels as of the end of August, with a swift rise observable around the date of the interest rate cut. We see similar behavior in trading volumes, as trading levels have been consistent in the past month, except during weekends (when activity is low). Hence, while trading activity is high, open interest hasn’t faltered, and traders are still holding on to their positions.

Bybit Perp BTC & ETH Open Interest — Open interest saw a spike upward in response to the Fed’s 50 bps rate cut on Sep 18, 2024

Bybit Perp Trading Volumes — Trading volumes in perpetual swap contracts have been consistent throughout the month, except for the spike on September 6. 

Funding Rates Are Positive Across Tokens

The price increase witnessed after the Fed’s rate cut has affected perp funding rates positively for most tokens. We notice that for almost all cryptocurrencies except TON, funding rates have registered positive and neutral levels. SOL, DOGE and ADA have shown more consistent, stubborn positive funding rates as compared to other coins. Meanwhile, between the two major tokens, ETH has registered substantially more positive rates than BTC since last week’s cut.

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BTC Options

During the past month, we’ve noted that BTC options have had more activity for puts than for call options. Trading volumes and open interest have increased for the latter, while short tenors are dominating the overall picture rather than longer-dated options. At the same time, open interest is recovering slowly for calls, almost reaching parity once again with that for put options. The same applies to implied volatility skews, with levels for short-tenor options growing slowly following the Fed’s cut. This is adding to the evidence of growing bullish sentiment in the derivatives market, along with a growing preference for short-tenor calls. At the same time, ATM volatility levels have generally been on the decline over the past several weeks, with short tenors exhibiting almost periodic oscillations.

BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

BTC ATM Implied Volatility Oscillates

BYBIT BTC & ETH Volatility Term Structure — Shorter tenor volatility has further dropped, with longer tenor remaining buoyed as short-term event risk has passed.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — Volatility has largely oscillated, but has dropped for short-tenor options. 

BYBIT BTC IMPLIED AND REALIZED VOLATILITY — Realized volatility has exhibited sideways movement for the past few weeks, recently falling below implied volatility levels.

ETH Options

While BTC showed a steady change in open interest for options, we cannot see any remarkable changes in ETH’s options markets, with calls still having an advantage on open interest and trading volumes. ATM implied volatility levels have exhibited the same behavior as BTC, with falling levels for shorter tenors while strongly oscillating for shorter-dated options. The effect of the interest rate cut on implied volatility skew has been the same as we observed for BTC options: while we saw a strong negative put-skew a few weeks ago, this preference is now slowly converging toward calls, with levels either neutral or barely negative across all tenors.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

ETH Volatility Follows That of BTC

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BYBIT ETH VOLATILITY TERM STRUCTURE — The term structure has registered falling levels of implied volatility, especially at the front end of the structure.

BYBIT ETH SVI ATM IMPLIED VOLATILITY — Implied volatility levels have followed the trajectory of BTC’s in the past weeks.

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BYBIT ETH IMPLIED AND REALIZED VOLATILITY — ETH’s volatility has moved in tandem with BTC’s sideways movements.

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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