BlockScholes X Bybit Crypto Derivatives Analytics Report (July 19, 2024): Crypto Market Revives to Express Trump Trade

Key Highlights:

Our weekly crypto derivatives analytics report dives into the current state of crypto, macro events and trading signals from Spot trading volume, futures, options and perpetual contracts.



The crypto market has seen significant movement over the past week, driven by political events. The increased likelihood of pro-crypto candidates winning has led to the market recouping most of the losses experienced during the June selloffs. In response, the crypto market has surged in open interest of futures and has seen a recovery in yields.



BlockScholes X Bybit Crypto Derivatives Report July 19

Trump Trade Is In Full Play

The dramatic events of the assassination attempt on former president Donald Trump have coincided with a strong recovery in crypto spot markets. Traders appear to be expressing the "Trump Trade" as the Republican candidate's probability of re-election has increased significantly following the attack. This has led to a recovery in crypto prices, especially Bitcoin and Ethereum, after the earlier sell-off in early July. 

The recovery in spot markets suggests that traders are betting on a continuation of Trump's pro-crypto policies should he return to the White House. This optimism around a Trump victory has helped to buoy crypto sentiment. Overall, the spot market recovery indicates that traders are favorably pricing in the increased likelihood of a Trump second term and the potential policy implications for the crypto industry.

ETH Futures Volume Rise During Spot Volatility

It’s ETH’s futures term structure that shows the strongest rally in yields at short tenors, resulting in a much flatter term structure of yields ahead of a hotly anticipated start-of-trading announcement for Ethereum Spot ETFs.

Perp Open Interests Recovers

While perpetual swap open interest has not fully recovered to pre-sell-off levels, we see a return to moderately healthy positive funding rates paid from longs to shorts, except for Toncoin which remains consistently negative. The major coins Bitcoin and Ethereum show similar demand for long exposure, despite the upcoming Ethereum Spot ETF launch. This suggests that traders are not positioning for a major divergence in performance between the two largest cryptocurrencies, at least in the near term. The return to positive funding rates, barring the Ton outlier, indicates that the leveraged long exposure has returned to the market, though not necessarily at the same scale as before the sell-off. 

ETH Option Volatility Premium Remains High Ahead of ETH Spot ETF Approval

Implied volatility has recovered back above the level of delivered volatility in early July 2024. The ratio between realized and implied volatility has flipped back above one due to a fall in realized volatility, as spot prices settle back at their pre–sell-off levels. In addition, we’ve seen a climb in implied volatility as markets adjust to the increased level of choppiness in spot prices over the past two weeks. The premium assigned to ETH volatility is larger than that for BTC, suggesting that traders are seeking or hedging exposure to ETH ahead of its impending ETF launch date to a greater extent than they are for BTC.



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