Block Scholes X Bybit Crypto Derivatives Analytics Report (Aug 28, 2024): Despite the Sell-Off, Bullish Sentiment Post-Election Persists
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Key Highlights:
Our weekly crypto derivatives analytics report dives into the current state of crypto, macro events and trading signals from spot trading volume and futures, options and perpetual contracts.
Derivatives markets remain positioned similarly after last week’s Jackson Hole Economic Symposium. Federal Reserve Chair Jerome Powell’s announcement of a rate-cutting cycle for September has had little effect on expectations, with markets already pricing in 100 basis points of cuts for the remaining meetings this year.
The significant driver was the spot price sell-off on August 28, which led to perpetual swap liquidations and a minor rise in short-tenor volatility. Yet, the volatility term structure still shows a premium for expirations linked to the U.S. presidential election on Nov 5, 2024.
Please check out some of the report’s highlights.
Futures Activities Muted in the Past Two Weeks
Open interest has stayed stable over the past two weeks, even as BTC's spot price dipped below $59K. In contrast, perpetual swap open interest has declined due to recent liquidations. This pattern mirrors previous sell-offs this year, suggesting traders are holding fewer overleveraged positions, thus reducing their liquidation risk during market volatility.
Investors Remain Bullish Post-Election
The term structure of volatility remains largely unchanged since Chair Powell's Jackson Hole speech, confirming existing market expectations about rate cuts. We observe a similar dislocation in volatility around options expirations before and after theU.S. presidential election coming up on Nov 5, 2024, with post-election expirations showing a stronger bullish skew for OTM calls, while short-dated expirations reflect a demand for downside protection. Although delivered volatility has stayed low over the past week, implied volatility for short-dated tenors hasn’t decreased from last week's levels.
TON Funding Rate Turns Bullish
Following the arrest of Telegram CEO Pavel Durov, TON's funding rate has shifted from consistently negative to positive, signaling strong demand for leveraged exposure. Previously, BTC had maintained a positive funding rate since the Bank of Japan–inspired sell-off in early August. In contrast, ETH has shown weak demand in the perpetual swap market, reflecting its underperformance in spot prices as highlighted by the sell-off on Aug 28, 2024.
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