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Our weekly crypto derivatives analytics report delves into macro events, the current state of crypto and trading signals from spot trading volume, and futures, options and perpetual contracts.
Trump's inauguration on Jan 20, 2025 was preceded by the launch of two meme coins from the Trump family, TRUMP and MELANIA, which quickly garnered billions in market capitalization. Speculation about a strategic Bitcoin reserve being included in the executive orders signed on the first day of his administration led to a significant bullish shift in derivatives market positioning. This shift resulted in an inversion of the term structure of volatility, increased funding rates on long positions and a tilt in short-tenor volatility smiles toward calls. However, when the anticipated bullish announcements didn’t materialize, implied volatility levels decreased, even as realized volatility increased. Despite this, the bullish skew toward out-of-the-money (OTM) calls persisted.
In the perpetual markets, funding rates remained consistently high across almost all assets, continuing beyond the inauguration event. In the options market, realized volatility surged to post-election highs, even as implied volatility levels fell due to an overestimation of the significance of inauguration day for crypto. Overall, positioning across all tenors remained bullishly tilted.
Please check out the report’s highlights.
During the inauguration weekend, perpetual swap trade volumes hit their highest levels in over a month as traders positioned for expected crypto-friendly executive orders. Notably, SOLUSDT perpetuals experienced a significant surge in activity, reaching new all-time highs and a spike in realized volatility. Trump's launch of the TRUMP meme coin on Solana DEXs allowed Solana’s network to surpass competitors in fee generation, highlighting the symbolic choice of a sitting U.S. president to launch on Solana instead of Ethereum.
Perpetual swap funding rates saw minimal repricing despite the lack of significant announcements on inauguration day, remaining at neutral-to-bullish levels across all coins. Open interest data indicated no major changes in positions, even amidst spot price volatility. Consequently, while options markets adjusted short-term expectations, sentiment in the derivatives market viewed the lackluster inauguration day as just one of many opportunities for future positive news in the industry.
Speculation that the incoming president would announce a strategic Bitcoin reserve in his inaugural speech led to a buildup of short-tenor options positions just before the event. This resulted in a significant increase in call buying and the strongest inversion of at-the-money term structure since the Nov 5, 2024 election. While the extreme pricing of front-end volatility has diminished, the strong skew toward OTM calls remains, reflecting a continued preference for upside exposure as Trump prepares to sign executive orders.
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