BlockScholes X Bybit Crypto Derivatives Analytics Report (Aug 14, 2024): We May Have Seen a Bottom, as the Market Hasnt Factored in Further Volatility

Key Highlights:

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

The cryptocurrency market has experienced a period of relative calm after the volatility of the previous two weeks. Yet, a lack of clear catalysts has hindered a full recovery in spot prices.

Derivatives markets are reflecting this uncertainty, with volatility levels reaching a normalization of the term structure.

Sentiment toward Ethereum remains more bearish, with higher implied volatility, lower funding rates and a stronger skew toward out-of-the-money (OTM) put options.

Please check out some of the report’s highlights.

ETH Futures Open Interest Remains Stable

Although open interest in futures contracts for both Bitcoin and Ether has increased over the past week, trading volumes have remained significantly lower than the peaks observed during the early August sell-off. Despite current futures yields suggesting a less bullish outlook for Ethereum in the short term as compared to Bitcoin, Ether contracts have seen only a fraction of the trading volume since then.

Perp Open Interest Gradually Recovers While Trading Volume Remains Lackluster

Similar to the futures market, perpetual swap markets have experienced relatively low trading activity since the price crash and subsequent partial recovery in early August. Open interest has gradually increased since the sell-off, likely due to a wave of liquidations, but has yet to reach the levels seen in late July.

Implied Volatility Doesn’t Suggest Another Leg Down; Realized Volatility Remains High

The strong inversion in the volatility term structure, caused by a surge in traders covering their options positions, has since corrected to a flat shape. However, volatility levels remain elevated, hovering near the highs observed at the end of July.

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