Bybit X Block Scholes Crypto Derivatives Analytics Report (Oct 16, 2024): BTC Options Volatility Front-Runs U.S. Election

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.

Despite the recent surge in spot prices, there remains a significant gap between long- and short-dated implied volatility. As a result, market participants are focusing more on post-U.S.-election expectations rather than the recent bullish trends in spot prices. This shift has resulted in a rise in realized 7-day volatility, which now aligns with the implied volatility levels of 30-day tenor options. Additionally, bullish responses to spot price movements are evident in perpetual funding rates, which are now positive for nearly all tokens.

Please check out the report’s highlights.

Futures Activities Final Sees Increase Since Early September, but Still Lags Behind Perps

Sources: Bybit, Block Scholes

In the past week, futures open interest has experienced only a modest increase. Although a substantial rally in spot prices has pushed BTC back to the upper end of its range, this rise hasn't been matched by a corresponding increase in futures open positions, which haven’t yet returned to their levels prior to the option expiration in late September.

Perp Open Interest Spikes

Sources: Bybit, Block Scholes

In contrast to the futures market, perpetual swap open interest has risen in line with the bullish price action early this week, reaching its highest levels in the past month. As with futures markets, there was a significant spike in trading activity Monday and Tuesday as the spot price rally boosted volumes. This surge in bullish sentiment has led to increased participation in perpetual contracts. The market continues to be heavily dominated by BTC, with traders clearly favoring Bitcoin over Ethereum in their positioning.

BTC Options Volatility Front-Runs U.S. Election

Sources: Bybit, Block Scholes

In the past week, the front end of the implied volatility term structure has remained relatively stable, highlighting the significant disconnect between long- and short-dated options, particularly in light of the upcoming U.S. election. As a result, the derivatives market is responding more to post-election expectations than to the recent bullish movements in spot prices, which have finally caused realized volatility to align with implied volatility levels. 

Spot price activity has also seen an increase in open positions, mirroring trends in futures and perpetual contracts. However, this uptick in positioning hasn’t been accompanied by a spike in trade volumes, indicating more gradual growth.

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