Bybit x Block Scholes: A Journey of Growth and Milestones Toward Becoming the No. 2 Crypto Exchange

Bybit’s Market Share and Userbase Expansion

Since its inception in 2018, Bybit has grown to be the world's second-largest crypto exchange, with over 60 million users worldwide. Its six-year journey has been marked by innovation, as highlighted by the continuous addition of new products. 

Bybit has become a leading force in the cryptocurrency space by expanding its ecosystem year after year, and bridging the gap between traditional finance and decentralized finance (DeFi). 

By 2024, Bybit became the second-largest centralized crypto exchange by trading volume. In 2023 alone, its market share of the top ten exchanges by volume grew from 1.56% in January 2023 to 8.39% by the end of the year — an almost 5x increase. As of May 2024, Bybit’s market share has exceeded the 10% mark, a testament to its growing success in capturing a larger volume of crypto traders. 

The comparison holds across the top 10 exchanges by perpetual swap trading volume also, as we will see later in the report.

Underpinning this extraordinary growth in market share has been equally impressive growth in the number of traders globally using Bybit’s platform. From late 2023, Bybit’s user base grew from 20 million global users to past 50 million users by Q3 2024.

With this growing user base came increased demand for various trading pairs, which in turn attracted more traders. The figure below showcases the growth in the number of monthly spot pairs traded by users. From 2022 to 2024, we observe the number of available pairs has more than doubled.

Increased spot pairs available to users may also explain why the spot market has seen a strong growth in active users, shown relative to its value in July 2021 (below).

This notable growth in active users aligns with the growth in spot trading’s proportion of total trade volume, which has been slowly increasing since 2023. While it still makes up a much smaller overall proportion of total trade volume, it’s seen consistent growth alongside the number of daily active users. As we show in the chart below, inverse and USDT-denominated perpetual swap contracts dominate about 80% of the total trade volume on the Bybit exchange.

This implies that perps have seen a larger average trade size than spot, split among fewer overall traders. One potential reason is that smaller retail traders likely make up the majority of the spot market, but larger institutions, such as crypto-native hedge funds, prefer to trade in perp markets for their increased capital efficiency.

Total monthly trade volume across all three instrument markets on Bybit, however, has steadily increased through this current crypto cycle, as the chart below illustrates. As we would expect, volume is in line with the broader market sentiment, having peaked at the height of the Q1 rally earlier in 2024, when spot prices also reached a local top. Since that high, volumes have dropped off slightly, but remain within a tight range. With the U.S. election event risk having passed and BTC on the road to $100K, we expect volume to have broken out of this range in November, too.

To further highlight Bybit’s growth story on this, the sixth anniversary of its launch, we’ll focus on key metrics to judge the maturity of Bybit’s primary markets: Spot, perpetual swaps and options trading. Along the way, we’ll highlight some key insights revealed by data sourced directly from Bybit’s public API and using Block Scholes’s proprietary volatility surface calibrations to Bybit’s options market pricing data.

Market Size Growth of Spot

Growth From Bear to Bull Markets

Spot trade volumes have grown to over $10B per day since their introduction in 2021. However, the path to growth hasn’t always been straightforward, and broader crypto market conditions have shaped the story throughout.

During the deepest point of the bear market in 2022, trade activity was subdued across all tokens: BTC, ETH and all other altcoins. This continued even as the cryptocurrency market, led by BTC, quietly began to recover over the course of 2023. The first sudden spike in activity occurred in late 2023 and early 2024, coinciding with whispers of BTC Spot ETF approvals and later their subsequent trading. 

The following increased appetite for spot exposure wasn’t just limited to BTC, however, as altcoins began to see a considerable portion of the daily activity. This is a theme that we see repeatedly throughout the history of spot trading: rallies in BTC lead to increased trade volumes in altcoins for a sustained period after the rally, but also during the move up in BTC. This suggests that capital rotation from BTC to altcoins is common even before a BTC top is reached.

Daily trade volume across all USDT-denominated perpetual pairs peaked at over $7B close to the date of the $73K March all-time high. Thereafter, Bitcoin’s price moved sideways between $50K–70K. However, trade volumes across each trading pair remained elevated throughout this period. Only after the U.S. elections did spot begin to rally once more, attracting yet another increase in trading activity as users rushed to Bybit to capitalize on the renewed market momentum and optimism. 

Altcoin Dominance?

Soon after spot trading’s introduction, its volume was quickly dominated by altcoins, driven in part by Bybit’s extensive offering of 518 tokens across 638 trading pairs (including each stablecoin variation. Data are rebased). But just as we saw with absolute trade volumes, traders’ preferences between majors BTC and ETH and altcoins appears to be market-dependent, too.

During the bear market bottom in 2022, altcoins (defined here as all trading pairs excluding those with BTC and ETH) recorded between 40% and 50% of the trade volume on Bybit. Over the same period, BTC alone frequently recorded more than 30%, while ETH made up the remaining proportion.

However, the story is quite different following the first stages of the bull market. Following the initial late-2023 rally in BTC, meme coin trading activity began to heat up as traders rotated out of BTC positions and into higher-risk, higher-return altcoins. When BTC reached its local high in March 2024, altcoin trading volume began to decline once again as BTC’s price fell from that high and then traded range-bound.

Following the U.S. elections on Nov 5, 2024, we’ve seen the initial signs of altcoin volume pick up. Earlier in the year, altcoin volumes were partly driven by meme coin mania and a boom in AI tokens — largely supported by cheaper-than previous transaction fees on Layer 1 blockchains.

In our previous report, we noted the possibility that the walled garden of the Spot ETFs could prevent capital creeping beyond BTC and ETH, the only two cryptocurrencies approved so far. However, the recent pickup in volume we’re seeing suggests increased interest beyond just the top two cryptos. As was the case in March, it’s meme coins that are enjoying a significant share of this volume, in addition to AI meme coins (in comparison to non-meme coin AI tokens in March 2024). Notably, several DeFi and Layer 1 tokens are also rallying, likely due to the prospect of fairer, crypto-friendly regulation. 

Volume Is Conditional

We’re also seeing a relationship between BTC spot prices and trade volumes on a more local scale. When Bitcoin rallied in late 2023 into Q1 2024, there were sustained increases in trade volume, reflecting heightened interest by market participants in capturing the upward moves. The recent post-election surge shows the same behavior: sustained trading volume follows, with sharp upward price moves. 

Conversely, earlier in the cycle, when BTC’s spot price crashed toward its bear-market bottom, sharp but temporary spikes in trade volume were followed by periods of much lower volume and activity. This indicates that the impact of volatility on trade volume is conditional on the direction of price movement — after rallies, the spike in volume is sustained, and after price drops, activity dampens down.

This suggests that trading activity and participation in the crypto market is closely related to price performance. Interestingly, the same data suggests that traders didn’t become bored by the mid-year sideways price action — since trade volumes in BTC barely dipped after the March peak until the resolution of the election campaign in November saw them take off further.

Ethereum, however, has behaved slightly differently. Where trade volumes are sustained during BTC price rallies, ETH trade volumes exhibit shorter bursts of increased activity before dropping off. In the chart below, during the same period of late 2023–March 2024, the rally from $2,000 to $4,000 coincided with sharp and temporary spikes in ETH trade volume.

Beyond sensitivity to price, trading volume on Bybit also exhibits consistent daily seasonal patterns. For example, each weekday exhibits an almost reverse V-shape, with notable spikes around 4PM UTC.

While traditional markets are closed over weekends, crypto never sleeps. Despite this reality, weekends are when the pattern breaks — as there is no meaningful spike at 4PM UTC, nor do we observe trade volumes anywhere close to those on weekdays. For traders seeking greater liquidity, weekdays on average exhibit more activity.

Dampened activity also leads to lower volatility in spot price. This is a phenomenon that’s been observed in markets for as long as there’s been sufficient data, raising a familiar question: Does volatility cause trading activity, or does trading activity cause volatility?

Regardless of your view on the direction of causality, realized volatility and trade volumes are strongly correlated with Bybit’s spot pairs. In particular, volatility is lowest in the early hours of Saturday morning, when BTCUSDT is traded the least, and spikes highest on Tuesday afternoon, when markets see the highest turnover in positions.

Furthermore, so far in 2024, trading volume on average is always highest on Tuesdays and lowest on Sundays. Extending this to 2022, we observed the same pattern of spikes around 4PM UTC and muted weekend trading, albeit at much lower volumes compared to 2024. This also makes sense when we consider that 2022 in its entirety contained the majority of the bear market period of this current cycle.

Market Size Growth of Perpetual Futures

Perpetual Dominance Persists

Although perpetual futures were among the first instruments to be introduced (all the way back in 2018), these contracts remain one of traders’ most popular choices for cryptocurrency exposure. They allow traders to hedge risks by taking both long or short positions, and to speculate on price movements in a capital-efficient manner via leverage. By adopting perpetual contracts, Bybit has significantly contributed to their popularity and enhanced the market liquidity for such products. 

While spot trading has seen an increase in the number of daily active users, daily trading volume for perpetual contracts has always exceeded that of spot trading volume — clearly illustrating the popularity of these contracts with traders. During the March 2024 rally, when spot trading volume spiked to $10 billion, perp volume reached close to $70 billion. In the post-election surge, daily perp trade volume exceeded that $70 billion mark, while spot daily volume was only slightly higher compared to its March levels earlier in the year.

One reason perpetual contracts are likely traded in higher volumes is due to their accessibility of leverage trading, which allows traders to amplify gains by committing a smaller amount of capital. Secondly, perp contracts provide traders with a simple method for shorting an asset (to profit from price decreases in it) in a way that spot trading cannot.

While perps dominate the lion’s share of volume, there’s been a steady but notable growth in the proportion of spot volume, particularly from the second half of 2023 onward during the rally to March’s all-time high. However, the growth in spot proportion has since stagnated, even during the most recent rally above $90K for BTC spot.

Inverse Perpetuals — Original Exposure but Losing Market Share

Bybit’s perpetual contract offerings began with inverse perpetual contracts, which are traded and settled in the underlying asset. Introduced before the widespread adoption of stablecoins, inverse contracts allow traders to take leveraged (and short) exposure to the underlying asset using the asset itself.

Bybit offers a smaller range of trading pairs in inverse perpetuals, but each one is a stalwart of the cryptocurrency industry. However, not only are there a smaller number of pairs to contribute to the total market open interest, but we also note that the levels of open interest for these instruments haven’t returned to their 2021 highs.

Stablecoin Perpetuals — Trader’s Choice

If total activity on Bybit has recorded all-time highs during the 2024 price rallies, why have activity levels in inverse perps remained below half of their 2021-cycle peak — despite BTC’s price rallying to several new highs in 2024?

Inverse perps have largely lost the market share we would have previously expected them to enjoy to the benefit of USDT denominated contracts (contracts settled in USDT, without the market risk of holding the underlying as collateral) introduced during the same cycle. This also aligns with the outright growth in stablecoin trading. 

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The chart above shows the open interest of inverse, USDT and USDC perpetual contracts from late 2020 to today. From mid-2021, USDT contracts began to trade more popularly, and within a year became the more dominant form of exposure for traders not only across perpetual swaps, but across all markets including futures and options. Over the course of 2021–2024, inverse perpetual contracts went from dominating 100% of the perpetuals market to just 15%. 

Users wanting exposure to perp contracts for almost any token pair are likely to find a more liquid market on USDT denominated pairs. In fact, USDT markets are the most common — Bybit currently offers 574 USDT settled perpetual pairs, in comparison to just 25 USDC settled pairs. USDC-settled perp pairs were introduced in 2022, but failed to gain the same popularity as their USDT counterparts. 

The chart below illustrates the open interest of the most popularly traded USDT pairs for perp contracts. We see a significant contingent of meme coins — DOGE, 1000PEPE, 1000BONK and WIF, among other familiar favorites.

However, the phenomenon of USDT dominance isn’t simply explained by a larger offering of trading pairs denominated in USDT, since the same pattern is apparent in the case of BTC contracts as well. Over time, the BTCUSDT perp contract has absorbed the majority of interest as compared to the inverse perp. 

This suggests that not only has stablecoin trading grown quickly in outright terms, buoyed by a larger range of trading pairs, but it’s also taken some of the market share that we would have expected to be enjoyed by inverse perpetuals.

There may be a few reasons for this. First, stablecoin-denominated perpetual exposure is simpler and easier to understand, as short positions don’t require traders to consider the implicit long exposure required in the margin of an inverse perpetual. Secondly, stablecoin-denominated trading makes it far easier to switch exposure between tokens: it facilitates the sort of phrenetic rotation of capital across a portfolio of meme coins traditionally associated with meme coin trading, which we’ve identified already as a strong driver of trading activity in the current cycle.

Market Size Growth of Options

Bitcoin Dominates Options Open Interest

Options are a crucial part of any developed derivatives market. Above and beyond products that offer linear exposure to the underlying asset, such as futures and perps, the convexity inherent in options products unlocks advanced trading strategies, natively leveraged positions, hedging mechanisms and more capital-efficient methods for price speculation. However, interest in options among cryptocurrency traders is far below that of perpetual swaps, a pattern we observe market-wide that’s made more noticeable by Bybit’s dominant perpetual swap volume. 

Despite this fact, Bybit boasts a developed options market across three tokens — BTC, ETH and SOL — reflecting an evolving user base across crypto, and an increasing share of traders comfortable with sophisticated instruments. Its options market has grown since launching in 2022 amid tough competition.

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Impressively, much of Bybit’s growth in options volume came following the depths of the bear market in late 2022. However, while ETH open interest initially grew, BTC’s dominance of both the narrative and market capitalization of all cryptocurrencies has fallen.

The chart above illustrates the evolution of Bitcoin put and call contracts over time. At options’ most actively traded point in mid-2023, their open interest totaled over $1.2B. We also observe the same pattern in the relative demand for puts and calls. Unlike with equities markets, we don’t see a preference for downside exposure in markets for crypto assets.

In equities, options markets are a popular method for hedging long exposure, achieved through holding the underlying or investments in ETFs — which can be seen (above) for open contracts in SPX options. That we do not see the same pattern for cryptocurrency supports another crypto truism — that traders are just as scared of missing out on extreme upside (a melt-up) as they are of experiencing a market crash, and position themselves accordingly in the options market.

Grown-up Instruments

The growth in Bybit's large open interest in options reflects the maturing of the cryptocurrency market as traders warm to more sophisticated instruments. However, how “mature” are crypto options markets?

One way to measure this parameter is to see how closely Bybit’s market tracks the price of options across derivatives markets. We can do this in a standardized way by evaluating how closely the volatility of options traded on Bybit tracks the implied volatility of Block Scholes’s cross-market composite, derived from prices across multiple exchanges. Larger levels of implied volatility indicate higher options prices, and lower levels result in lower options prices (all else remaining equal). 

A difference in implied volatility levels across exchanges means different prices available on each venue, which can create arbitrage opportunities. We would expect a tighter pricing to the market index to occur when market depth improves. What we find, in fact, is that even as early as launch, the level of volatility implied by options traded on Bybit’s markets closely tracks that implied on other markets. The chart below compares the implied volatility for 30-day tenor options between Bybit (orange) and Block Scholes’s market composite (green).

The same is also true of options stuck further away from the at-the-money level, where liquidity is often thinner — Bybit’s OTM call options are priced in-line with the market without a significant lag, indicating that the top layer of the order book provides an efficient market-consistent pricing.

Conclusion

Bybit’s sixth anniversary serves as a testament to its remarkable growth in becoming a leading centralized exchange, with a market share of 12.21% as of Q2 2024 and user numbers surpassing 50 million by Q3 2024. Spot trading volumes grew to over $10 billion daily by 2024, driven by BTC Spot ETFs and altcoin trading.

Bybit’s data also highlights wider seasonality trends in crypto markets: users can expect quieter activity and less liquidity on weekends, with the most volatility typically occurring around 4PM UTC on weekdays, in line with the highest levels of trading volume. This has correlated strongly with market sentiment, especially during rallies or significant events like elections.

Additionally, the contrast between crypto and equity options markets — where crypto traders are as fearful of missing out on sharp moves up as they are of market crashes — will become increasingly significant as the intersection of crypto and traditional finance deepens and institutions expand their presence in the space.

Bybit is positioned to grow further, driven by continued demand for diverse trading products. Perpetual swaps look set to continue dominating the bulk of the volume, reflecting traders’ preference for leveraged exposure.

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