Bybit, the world’s second-largest cryptocurrency exchange by trading volume, in collaboration with Block Scholes, released the latest weekly crypto derivatives report. The report provides one last bird’s eye view of movements and signals in the derivatives market in the run up to Trump’s inauguration. The overall found its pace in the absence of major news events, with the spot market treading steadily in the second week of the year.

Data highlighted that realized volatility has caught up with implied volatility following the winter break lull, indicating a more energized market. Trading volumes in perpetual contracts have normalized, though participants appear to be awaiting clear crypto-specific catalysts for more decisive positioning.

Key Insights:

Funding Rates Signal Long Position Strength: Perpetual swap funding rates maintained positive territory despite spot price fluctuations, indicating sustained demand for long positions. While BTC and ETH lead market direction, CRV showed consistently bullish rates, contrasting with ATOM which dropped 30% from monthly highs.

BTC Options Reflect Long-Term Optimism: BTC's realized volatility has recovered to match implied levels after the holiday lull. While short-term options show increased hedging activity, longer-dated contracts maintain a bullish skew with high implied volatility in the 50s range, supported by balanced open interest between calls and puts.

Volatility Patterns Turn Bullish Post-CPI: Recent CPI data triggered a shift in BTC and ETH volatility smiles, with OTM calls showing higher implied volatility than puts near BTC's $100K level. This marks a reversal from the previous week's bearish short-term sentiment, highlighting market sensitivity to macro factors.

Sources: Bybit, Block Scholes

The full report, including detailed analysis of volatility trends, funding rates, and options market dynamics, is available for download. 

#Bybit / #TheCryptoArk /#BybitResearch