Block Scholes X Bybit Crypto Derivatives Analytics Report (Sep 4, 2024): Volatility Spikes on Front End With BTC Put Options Open Interest Higher Than Call Options

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.

Following last week's drop in spot prices, implied volatility has increased across the term structure for both major cryptocurrencies, particularly on the front end. For instance, ETH's 7-day option volatility has matched that of long-tenor options. Derivatives markets have shown a skew toward out-of-the-money (OTM) puts for short-term options, indicating a strengthening short-term bearish outlook as spot prices remain weak. 

Negative sentiment persists in the crypto market, with BTC options reflecting higher open interest for puts than calls, while ETH call options are still higher than the puts.

Please check out some of the report’s highlights.

Perp Open Interest Falls

After the early August sell-off, open interest for perpetual initially rose, but has since shown a consistent downward trend following last week's volatility. Similarly, trading volumes have also declined. This trend has been evident over the past month, with peak volumes occurring after the significant price drops in early August.

SOL Funding Rates Turn Consistently Negative

After trading positively for several days at the end of August, SOL consistently shows negative funding rates, a sharp contrast to other cryptocurrencies, which have fluctuated. Among these, CRV has maintained stubbornly positive funding rates, while TON has returned to negative sentiment after a brief period of positivity following the arrest of Telegram’s CEO.

BTC Put Options Open Interest Flips Call Options

While implied volatility for ATM options has fluctuated over the past week, there’s been a notable increase across the entire term structure, especially in the past day. Skew indicates a stronger preference for bullish OTM calls for long-tenor options expiring after the election, alongside a bearish sentiment for short tenors. 

Notably, after the August 30 options expiration, open interest for call options declined significantly compared to puts. This, combined with recent price drops and stagnant spot prices, has led to skepticism toward positive sentiment, resulting in fewer call positions rolling over and lower trading volumes than puts.

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