Bybit X Block Scholes Crypto Derivatives Analytics Report (Nov 6, 2024): Traders Maintain Long Positions as Election Risk Clears

Key Highlights:

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

As the 2024 U.S. election results became apparent, short-term implied volatility for both BTC and ETH fell sharply. The term structure for BTC flattened, while ETH's evolved into a steep curve. Leveraged positions, which were reduced during the pre-election volatility, have since recovered, resulting in increased open interest in both perpetuals and futures. Even after the event risk has passed, positioning in all markets is near all-time highs, suggesting that traders are eager to maintain leveraged long exposure as BTC reaches record levels.

Please check out the report’s highlights.

Traders Maintain Leveraged Long Post-Election

Sources: Bybit, Block Scholes

Last week, futures open interest saw a significant drop as traders closed out leveraged positions in anticipation of the election amid pre-election price volatility. However, following a brief period of calm before the results were announced, open interest levels quickly rebounded, indicating a swift return of leveraged positions and a renewed willingness to take on risk. BTC continues to lead in futures positioning, as it does across all derivatives markets, indicating that a shift of capital into ETH contracts has yet to occur. In contrast to the trend of decreased activity, trading volumes remained robust even over the weekend.

Perp Traders Remain Bullish

Sources: Bybit, Block Scholes

Perpetual swap open interest reflected the trends seen in listed-expiration futures in the week leading up to the election and during the night of the event. Initially, positions gradually declined amid pre-election volatility, but surged sharply as the election outcome became clearer. 

This shift suggests a renewed interest in directional bets, with traders re-entering positions to capitalize on the positive movement following the election results. Notably, weekly perpetual trading volumes remained steady and, similar to futures, were unusually high over the weekend. This sustained volume and increase in open interest indicate that market participants are actively positioning themselves in response to the growing clarity surrounding the election outcome.

Option Volatility Flattens

Sources: Bybit, Block Scholes

BTC’s volatility term structure has recently flattened, following a prolonged inversion in the two weeks leading up to the election. This change reflects the resolution of event risk after the market's favored candidate was elected, with no indication of a contested outcome. 

Now, short-term volatility levels have dropped to align with the levels implied at longer tenors throughout the election period. Despite steady and relatively subdued trading volumes, BTC options open interest has surged significantly in recent hours, signaling increased interest in positioning for potential longer-term volatility in the aftermath of the election.

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