Bybit X Block ScholesCrypto Derivatives Analytics Report (Sep 25, 2024): Short Tenor Volatility for BTC Option Drops Following Fed Rate Cut

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.

After the Federal Reserve's 50 basis point rate cut on September 18, 2024, spot prices for BTC and ETH have responded positively. The derivatives markets show several signs of favorable sentiment: open interest in both futures and perpetual swaps remains high, and funding rates have generally been positive across most tokens. BTC call open interest has gradually risen, and the volatility smile has expanded for both BTC and ETH calls. Implied volatility for at-the-money short-dated options has fluctuated downward, suggesting an increasingly positive outlook for the derivatives market in the short term.

Please check out some of the report’s highlights.

Futures Volume Declines, but Open Interest Remains Resilient

Source: Bybit, Block Scholes

In recent weeks, futures trade volumes have declined significantly, dropping from $16M–$20M in early September to about $6.7M. However, futures open interest has remained stable, with BTC levels consistently higher than ETH across all tenors. These factors indicate that traders are maintaining their positions, particularly in longer-dated expirations.

Steady Perpetual Activities

Source: Bybit, Block Scholes

Perpetual swap open interest has remained stable with limited fluctuations. Although it was slightly lower at the beginning of September, it has returned to levels seen at the end of August, particularly spiking around the interest rate cut date. Trading volumes have also been consistent over the past month, aside from lower weekend activity. Overall, while trading activity is robust, open interest remains strong, indicating that traders are holding onto their positions.

BTC ATM Implied Volatility Falls Sharply Since Fed Rate Cut

Source: Bybit, Block Scholes

Over the past month, BTC options activity has favored puts over calls. While trading volumes and open interest for call options are rising, short tenors are currently more prominent than longer-dated options. Open interest for calls is slowly recovering, nearing parity with puts. Implied volatility skews for short-tenor options have also fallen since the Fed's rate cut, indicating growing bullish sentiment and a preference for short-tenor calls. At the same time, ATM volatility levels have generally declined over the past several weeks, with short tenors exhibiting almost periodic oscillations.

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