Bybit’s latest Block Scholes Crypto Derivatives Analytics Report reveals a concerning spike in implied volatility across the cryptocurrency market, particularly for major cryptocurrencies like ETH. This increase in volatility is indicative of growing bearish sentiment among traders as spot prices remain subdued. The shift towards out-of-the-money puts for short-term options further highlights the prevailing skepticism towards positive price action in the near future.
Declining Open Interest and Trading Volumes
One key insight from the report is the consistent decline in open interest for perpetual contracts, following a sharp rise after an early August sell-off. This decline in open interest is mirrored by a decrease in trading volumes, signaling a waning confidence in the market amidst persisting volatility. The dwindling interest in perpetual contracts reflects a cautious approach from traders in the current market environment.
The report also points out that SOL has experienced consistently negative funding rates, in contrast to tokens like CRV with positive rates. This shift in funding rates for SOL, along with the negative rates for TON following the arrest of Telegram’s CEO, suggests a negative sentiment surrounding these specific tokens. The divergence in funding rates among different tokens indicates varying levels of market confidence and risk appetite among traders.
In the options markets, bearish sentiment is pronounced with BTC puts overtaking calls in terms of open interest. A similar trend is observed in ETH, although calls still maintain a slight edge, reflecting a more cautious optimism in Ether markets. The decrease in the rollover of call options following the expiration of August contracts further underscores the growing short-term bearishness in the market. As spot prices continue to show weakness, traders are adopting a more risk-averse approach towards positive price movements.
Bybit’s Block Scholes Crypto Derivatives Analytics Report provides valuable insights into the current state of the cryptocurrency market, highlighting key trends such as the spike in implied volatility, declining open interest, and shifting sentiment towards bearishness. Traders and investors can leverage these insights to make informed decisions in a volatile market environment.