Despite significant options expirations on Friday, Bybit, the second-largest cryptocurrency exchange globally by trading volume, highlighted the low level of market volatility in their most recent Crypto Derivatives Analytics Report, which was published in partnership with Block Scholes. The realized volatility of ETH and BTC has gone up, but short-term options haven’t changed with it. This suggests that although spot prices are shifting, the options market is not entirely responding to these swings, while BTC and ETH volumes have showed somewhat different patterns.
With more than $525 million in BTC and ETH options contracts expiring on Dec 27, 2024’s end-of-year options expiry appears likely to be one of the largest ever, although predictions for volatility have remained low. The analysis reveals a unique reversal in ETH’s volatility structure, but BTC has not echoed the response. Additionally, a shift in financing rates—sometimes becoming negative as spot prices drop—signals a new market phase. Notably, BTC’s volatility structure has been less sensitive to changes in spot prices, but ETH’s short-term options are displaying more apparent fluctuations.
Market expectations for event-related volatility, however, are still low and far more responsive to spot movements over the last two weeks. The spot price has fluctuated between $92K and $106K and $3.3K and $4K, respectively, indicating an increase in realized volatility. But short-tenor options’ indicated levels haven’t increased to keep up with it. Additionally, short-term Bitcoin options have not increased as much as we had anticipated after the US elections. This indicates that even if the volatility term structure of ETH has reversed, the volatility term structure of BTC still assigns stronger long-term volatility expectations than short-term ones. In combination with spot declines, funding rates for all tokens have entered their third market regime in as many weeks, diving to negative.
- Perpetuals: Funding rates have moved in lockstep with spot after a period of neutral levels and sporadic negative levels.
- Options: While ETH short tenors have fluctuated greatly at higher levels, Bitcoin’s term structure is still less sensitive to spot changes.
Key Findings:
BTC Options Expirations:
Three times in the last month, the realized volatility of Bitcoin has exceeded the implied volatility, but each time it has stabilized. There is still a lot of open interest in Bitcoin options, which could lead to more volatility as the year draws to a close. The upcoming expiration of about $360 million worth of Bitcoin options (both calls and puts) may have an impact on price movement.
ETH Options: Calls Dominate
Sources: Block Scholes and Bybit
The volatility term structure of ETH has flattened, holding levels akin to those observed over the previous month, despite a midweek inversion. Even though market movements and trading activity are more on the put side, calls outnumber puts in open interest in ETH options in the last week of 2024.
Get the Complete Report:
Download the complete report here to get more in-depth information and investigate the possible effects on your cryptocurrency trading tactics: Analysis Report on Bybit X Block Scholes Crypto Derivatives (Dec. 24, 2024)
