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A US Recession through the lens of Polymarket

In this report we will explore the probability of a US recession based on on-chain Polymarket data. We will then also identify some differences in the probabilities between several related Polymarket markets that track the path of monetary policy by the Fed, and compare them to similar measures in traditional finance markets. Our goal is to highlight the discrepancies in sentiment based on data from on-chain and off-chain markets and identify some dislocations between markets.

April 18, 2025

Crypto, Derivatives, Macro, DeFi

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DeFi Analytics 17th April 2025

This week's edition of our Crypto DeFi Analytics. The Beacon Chain continues to show a strong net outflow of validators while Solana widens its daily fee generation lead over Ethereum, with an over $1M difference.

Block Scholes x Bybit March Volatility Review

Implied volatility continued to spike sharply in response to spot price moves, with repeated inversions in the term structure driven more by macro shocks than by pre-positioning ahead of known events. US president Donald Trump’s series of tariff announcements and walkbacks created whipsawing price action, with crypto volatility peaking after major policy moves — and collapsing just as quickly in periods of calm.

Block Scholes x Bybit Crypto Derivatives April 9 2025

After initially holding firm following US president Donald Trump’s “Liberation Day” tariffs, crypto joined the global market sell-off as BTC dropped from $87K on Apr 2, 2025, down to a local bottom of $74K. Its term structure once again inverted before slightly abating, as we’ve often seen it do, and ETH’s term structure has remained at an already inverted state. Short-tenor BTC volatility smile skews reached a bias toward OTM puts, reflecting even more bearish sentiment than during the turmoil of the US banking crisis in Q1 2023. These levels of volatility have since dropped off, as Trump announced yet another pause on his tariff plan. This time, the reciprocal tariffs have been temporarily paused for 90 days (except for those on China), which has resulted in a dramatic spot price rally.

DeFi Analytics 11th April 2025

This week's edition of our Crypto DeFi Analytics. April 7th saw Ethereum's daily fee generation more than double Solana's, liquidations spike on Aave and Compound and Bitcoin plunge from $83K to below $76K.

Bybit Incident Postmortem

On Feb 21, 2025, Bybit, the world's second-largest cryptocurrency exchange by trading volume, suffered a major security incident that involved an exploit of one of its Ethereum cold wallets. In this report, we’ll provide a guided explanation of the immediate market impact of the security incident and subsequent recovery.

Block Scholes x Bybit Crypto Derivatives April 6 2025

As markets finally approach the day of tariffs that US president Donald Trump has dubbed America’s “Liberation Day,” crypto continues its macro-sensitive spot volatility. That volatility has seen BTC drop from its $88K local high to $82K, as President Trump showed signs that his reciprocal tariffs would not spare any country, though notably, the tariffs do not apply to Russia or North Korea. Implied volatility has exploded and since eased. Other derivatives markets metrics show BTC and ETH volatility smile skews remain significantly skewed towards puts, though slightly higher than the recent levels reached, which were last seen in March 2023.

DeFi Analytics 4th April 2025

This week's edition of our Crypto DeFi Analytics. Solana and Ethereum's daily fee generation shows an emerging cyclical trend, while Ethereum’s Beacon Chain has seen a steady rise in active validators since mid-March.

DeFi Analytics 28th March 2025

This week's edition of our Crypto DeFi Analytics. Solana maintains its lead over Ethereum in daily fee generation, while blob gas drawdowns hint at easing demand from Layer 2s.

Block Scholes x Bybit Ethereum’s Pectra upgrade and the market’s cautious reaction

Ethereum’s persistent underperformance relative to both BTC and competitor smart contract–enabled blockchains highlights the urgency behind the Pectra upgrade, which seeks to enhance network scalability, staking efficiency and user experience. Technical improvements in the form of Ethereum Improvement Proposals (EIPs), such as validator consolidation (EIP-7251) and streamlined withdrawal mechanisms (EIP-7002), address current structural inefficiencies, potentially attracting more staking participation, while adjustments to blob space (EIP-7691) further the incentives for increased Layer 2 adoption initiated by March 2024’s Dencun upgrade.

One Last Inversion For March?

The week began with a relief rally but the risk-on appetite has proven to be short-lived. SPX and NDX extended their losses into a third consecutive day following Trump's auto tariffs and and the major 4 crypto assets have all fallen 3-6% on the day so far. BTC's term structure of volatility briefly inverted whilst ETH's term structure is currently flat. Separately, Intercontinental Exchange Inc. is partnering with Circle to explore the integration of the USDC stablecoin into ICE’s derivatives exchanges and clearinghouses.

The Stablecoin Rush

Fidelity Investments and the State of Wyoming join Trump-backed World Liberty Financial in the race towards stablecoin issuance whilst GameStop Corp. announce plans to raise $1.3B via 0% Convertible Senior Notes in order to acquire Bitcoin. Risk-on assets fell once again after a brief reprieve earlier in the week and President Trump has announced a 25% tariff on all auto imports, beginning April 2.

BTC, GME and WLF

BTC is trading close to its two-week high, though the move up in spot hasn't quite been matched by the same bullish momentum in derivatives markets. BTC's funding rate is close to 0% and both the term structure of volatility for BTC and ETH has continued to steepen as front-end expectations decline. In DeFi, World Liberty Financial has announced plans to launch its own dollar-backed stablecoin and Cboe has filed on behalf of Fidelity for a Solana ETF.

Another Relief Rally?

Crypto and equities started the week with a rally, after a one-month long stretch of losses amidst signs that President Trump's "Liberation Day" tariffs may be narrower in focus than expected. BTC has benefitted from the boost in risk-sentiment, breaking past $88K briefly. While not turning strongly bullish, sentiment in derivatives markets has at least pulled away from the persistently bearish tilt it’s held over the last few weeks with futures yields rising particularly at short tenors and funding rates flipping positive.

The Recovery Continues

The modest recovery of the crypto market continues as BTC currently trades at $87K amidst signs that President Trump's reciprocal tariff program may be more targeted and focused than previously expected. Front-end volatility for both BTC and ETH is close to their lowest levels of the month and BTC’s volatility smile looks to be shifting towards calls. ETH’s front-end skew levels have also ticked up, indicating some renewed demand for out-the-money call options relative to OTM puts.

DeFi Analytics 21st March 2025

This week's edition of our Crypto DeFi Analytics. The trend of Solana’s daily fee generation outperforming Ethereum’s has re-emerged, while ETH’s hourly average gas fees burned per block remain minimal with no noticeable spikes in demand.

Block Scholes x Bybit Crypto Derivatives March 21 2025

The broad-based decline in global asset prices was arrested this week, with crypto assets continuing their high correlation to US equities during a recovery. BTC is trading higher, above $85K, while ETH has recovered a key psychological level at $2K. Despite this, activity in derivatives markets has remained low. Funding rates for major tokens BTC, ETH and SOL have been consistently negative over this period. However, the demand for short-dated options, which was particularly strong in protection against further downside moves, has fallen alongside an end to the high level of realized volatility that has dominated markets over the past month.

“Ending the last administration’s regulatory war on crypto”

President Trump’s two-minute video presentation at the Blockworks Digital Assets Summit disappointed market participants, with BTC falling from $86K down to $83K. With that move in spot, BTC’s term structure of volatility has steepened and at-the-money implied volatility for 7-day tenors is currently at its lowest since late February. Short-dated optionality once again expresses appetite for downside protection with volatility smiles for tenors less than 30 days tilted towards OTM puts. Separately, Pump.fun, a memecoin launchpad protocol, has launched its own decentralised exchange, PumpSwap, on Solana.

"Transitory Inflation"

The Federal Reserve, as expected, left the federal funds rate unchanged at 4.25%-4.50%. The FOMC's revised SEP shows higher inflation at the end of 2025 and lower GDP growth from 2.1% to 1.7%. Chair Powell also expressed the FOMC's "base case" for tariff-induced inflation as "transitory" and announced a slowdown in the pace of quantitative tightening. Markets took the dovish delivery positively with BTC volatility smiles skewing towards calls at all tenors at BTC spot price rallied through $87K.

Rates Hold, Inflation Pressures

The Bank of Japan has kept interest rates unchanged and the Fed is expected to follow suit—but uncertainty looms amid inflationary pressures and global trade risks. Institutional crypto adoption gains momentum as CME Group launches SOL futures. Meanwhile, MicroStrategy (MSTR) is offering 5 million shares of its 10% Series A Perpetual Strife Preferred stock to the public.

Sideways Lull

BTC appears to be in a sideways lull since Friday around 20% below its all-time high, as the wider crypto market consolidates without a lack of new news to drive price action. That muted sentiment is reflected in derivatives markets too – while both BTC and ETH’s volatility term structures have re-inverted, they remain considerably compressed since last week’s highs. Additionally, although they are no longer trading below spot price, short-dated futures currently do not trade close to the spread above spot that they did during the run to $109K in January.

DeFi Analytics 14th March 2025

This week's edition of our Crypto DeFi Analytics. Ethereum and Solana's daily fee generation are now more comparable, and overall down from last week. Aave liquidations surged on March 11, as ETH spot hit a new 2025 low.

Volatility Review February 2025

While crypto volatility in February 2025 was bookended by two incredibly choppy periods, the middle of the month saw BTC trade with a realized volatility level of just 29%. This level has marked the floor of BTC’s realized volatility over the past 18 months, with reversions to the mean occurring shortly after. Despite a significant drop-off in volatility expectations when the market digested the details of US president Donald Trump’s plan for a strategic crypto-asset stockpile, volatility expectations have once again rallied for short-dated options. This has resulted in a return to the inverted term structure of volatility that BTC and ETH options had traded with at the end of February.

Crypto Markets Daily Mar 14 2025

The increasing worries surrounding an ever-evolving program of tariffs by President Trump continues to weigh on risk-on sentiment for US equities. The latest episode involves a potential 200% tariff on EU wine and alcohol products. The S&P 500 has officially joined the NDX in entering a technical correction, though crypto-assets on the other hand have slowly moved up through yesterday evening into today.

Crypto Markets Daily Mar 13 2025

US equities felt some reprieve yesterday with a softer-than-expected CPI print which also saw BTC slowly move upwards to $84K. Its term structure of implied volatility has compressed almost into a flat structure, however ETH’s term structure of volatility is still inverted. Skew levels for ETH at all tenors excluding the 7-day have lost some of their bias towards puts as its spot price continues to trade sideways since the beginning of the week, though only the 180-day tenor option assigns a call-premium. Canada announced some further "dollar for dollar" retaliatory tariffs.

Crypto Markets Daily Mar 12 2025

President Trump walks back yet another tariff threat, this time on raising steel and aluminium levies on Canada to 50%. Additionally, the President has downplayed recession risks stating the US economy is "going to boom", with yesterday's JOLTS report adding some aid to that narrative. BTC is currently experiencing a relief rally, though derivatives markets remain less bullish -- volatility smile skews are still towards puts for all tenors below three months, futures prices trade below spot for the first time since the November election, and perpetual swap funding rates have turned negative.

Crypto Markets Daily Mar 11 2025

The three-week long US equities sell-off deepened even further yesterday with the S&P 500 posting its largest single-day loss since December 2024 and the Nasdaq-100 entering a correction zone. That widespread de-risking saw BTC fall to $78K, whilst treasuries rallied. BTC and ETH’s term structures remain inverted, with skew for all tenors below 90 days significantly put-skewed.

DeFi Analytics 7th March 2025

This week's edition of our Crypto DeFi Analytics. Ethereum and Solana's daily fee generation remains low. Arbitrum's hourly volume spiked to nearly $450M after Trump's bullish post about a potential US crypto reserve triggered a market rally.

Block Scholes x Bybit Crypto Derivatives March 5th 2025

Crypto price action continues to be driven by US President Trump’s policies. Several SEC cases against crypto-native firms have been dropped over the past month, positive news for the industry that was followed up by Trump’s weekend announcement of the inclusion of BTC, ETH, XRP, SOL and ADA in a US strategic reserve.

Crypto Markets Daily Mar 7 2025

The much anticipated Strategic Bitcoin Reserve was formally signed in an Executive Order by President Trump, though the overall market reaction has been one of disappointment, with BTC falling over 5% on the news, before paring some losses back. Derivatives markets reflect that disappoint too. Implied volatility at the front-end for BTC has dropped sharply by over 10 points and BTC perpetual futures funding rates have also dropped negative.

Crypto Markets Daily Mar 6 2025

BTC continues its recovery amidst a wider breath of relief from risk-on assets as Trump exempts automakers from his recent tariffs for one month. The term structure of volatility for both BTC and ETH is still inverted, though skew for short tenor BTC options is now positioned closer to neutral. Euro-area bond yields have rallied significantly amidst increased EU fiscal spending.

Crypto Markets Daily Mar 5 2025

BTC rebounded from $82K to $89K (+6%), coinciding with a 0.88% rise in SPX futures post-close, after Commerce Secretary Lutnick suggested Trump may reconsider tariffs on Canada & Mexico. Markets fell sharply - SPX dropped 1% to its lowest post-election level, while 2-year Treasury yields declined 11bps. Fed rate cut expectations have risen, with three cuts now priced in for 2025.

Crypto Markets Daily Mar 4 2025

President Trump's 25% tariffs on Canada and Mexico and doubled levies on China weighed heavily on risk-on sentiment across the board, with BTC down 9% on the day. ETH has completely erased its Sunday gains following the Strategic Reserve announcement and both majors' currently have an even steeper implied volatility term structure. ISM Manufacturing data disappointed and the Atlanta Fed's GDPNow forecast has fallen even lower.

Crypto Markets Daily Mar 3 2025

President Trump's announcement for a Strategic Crypto Reserve containing BTC, ETH, XRP, SOL and ADA has partly reversed the price slump of February. BTC and ETH's implied volatility term structures once again inverted and BTC's short-tenor options are skewed towards puts. The Atlanta Fed's GDPNow model currently predicts a 1.5% annualised decline in GDP growth for Q1 2025.

DeFi Analytics 28th February 2025

This week's edition of our Crypto DeFi Analytics. Ethereum and Solana saw their lowest daily fee generations this month and aggregate liquidations across Aave & Compound remain surprisingly low.

February 28, 2025

Block Scholes x Bybit Crypto Derivatives February 28th 2025

Macro headwinds are once again in the driver’s seat for crypto, as a sell-off that began over the weekend has deepened throughout the early part of this week. Following a period of dismal sideways price action, BTC, ETH and almost all altcoins have followed the lower trajectory of equities, gold and treasury yields. Derivatives markets, however, only began to show signs of significant bearish sentiment and a material increase in volatility expectations on Wednesday afternoon as the selloff deepened.

February 28, 2025

Crypto Markets Daily Feb 28 2025

Bitcoin's selloff intensified during the opening of Asian equity trading hours, reaching an intra-day low of $78.5K. The deepened correction has resulted in BTC and ETH's implied volatility term structures to invert more significantly, with BTC 7-day tenor ATM volatility almost matching levels during the early February inversion. President Trump gave the greenlight for Mexico, Canada and China tariffs from March 4. Separately, there are multiple new developments in DeFi.

February 28, 2025

Crypto Markets Daily Feb 27 2025

BTC and ETH's implied volatility term structures have once again inverted as front-end vol lagged a limp rebound in spot prices during early Asian trading hours. Spot Bitcoin ETFs continue their onslaught of selling, recording the highest single day of outflows earlier in the week. President Trump further added to market uncertainty yesterday as he gave mixed messages regarding his tariff implementations on Mexico and Canada.

February 27, 2025

Crypto Markets Daily Feb 26 2025

The Conference Board's recent survey showed consumer confidence in February saw the largest single-month fall since August 2021. The 10Y US yield dropped to its lowest level year-to-date following the release and markets are now fully pricing in two rate cuts over the course of 2025. ETH's implied volatility term structure has flattened from its inversion yesterday and is currently up 4% today. The SEC has officially acknowledged Greyscale's Cardano (ADA) ETF filing.

February 26, 2025

Crypto Markets Daily Feb 25 2025

BTC and the wider crypto market has been steadily falling driven by a confluence of factors. That fall was amplified further by President Trump confirming his tariffs on Mexico and Canada “are going forward, on time”. ETH is down 10% on the day and its volatility term structure has notably inverted.

February 25, 2025

Bybit ETH Hack

Bybit was hacked for $1.46 billion in Ethereum and staking derivatives, allegedly by the Lazarus Group. The attack involved a phishing-style manipulation of a routine multisig cold wallet transaction rather than a flaw in the Ethereum network itself. While some stolen funds were swapped into Bitcoin and Tether froze 181K USDT, the market impact on ETH was minimal given the asset’s large trading volume.

February 22, 2025

Block Scholes x Bybit Crypto Derivatives February 21st 2025

Driven by fewer macroeconomic releases than in the first month of 2025, crypto’s lower-volatility environment has resulted in a sideways slog in spot prices. This has in turn had the expected impact on derivatives markets: lower implied volatility pricing, a steepening term structure and nearly unchanged levels of open interest across all instruments. ETH options markets, however, continue to price in a continuation of its more volatile spot price moves. As we’ve seen in previous instances, this sideways spot price movement includes an underperformance in altcoins, expressed most obviously in derivatives markets as a disappointing funding rate.

February 21, 2025

DeFi Analytics 21st February 2025

This week's edition of our Crypto DeFi Analytics. Feb 17th saw Ethereum's fee generation outperform Solana's for the day with gas fees burnt per block spiking. Liquidations across Aave and Compound spike on the same date, coinciding with the brief ETH spot rally.

February 21, 2025

Crypto Markets Daily Feb 21 2025

At-the-money volatility for BTC and ETH continue to drop across all tenors, with ETH 7-day tenor options maintaining a 50% volatility premium. Core inflation in Japan rose to its highest since June 2023, increasing the expectation for a BOJ rate hike, and growth in Europe remains sluggish. There are multiple new developments in DeFi including Franklin Templeton's new Bitcoin and Ethereum ETF.

February 21, 2025

Crypto Markets Daily Feb 20 2025

BTC and ETH both move sideways at +0.7% and +1.5% (24hrs) respectively. Derivatives markets reflect this, with ETH’s volatility term structure flattening after a mild inversion, while BTC’s remains steep.

February 20, 2025

Crypto Markets Daily Feb 19 2025

BTC and ETH both move sideways at +0.7% and +1.5% (24hrs) respectively. Derivatives markets reflect this, with ETH’s volatility term structure flattening after a mild inversion, while BTC’s remains steep.

February 19, 2025

Crypto Markets Daily Feb 18 2025

SOL is down 8% on the day, coinciding with the 90% drawdown in the Solana based LIBRA memecoin token. ETH on the other hand, rallied 8% yesterday before paring its gains back, resulting in an inverted at-the-money implied volatility term structure.

February 18, 2025

Crypto Markets Daily Feb 17 2025

Binance Smart Chain is making a comeback, with Pancake Swap processing $1T in cumulative trading volume. Abu Dhabi sovereign wealth fund Mubadala Investment Company purchased $436.9M of BlackRock's IBIT ETF in Q4 2024 and GameStop is also considering purchasing Bitcoin with its $4.6B cash reserve. The President of Argentina is facing impeachment threats following his endorsement for the LIBRA token which has lost 90% of its market-cap.

February 17, 2025

DeFi Analytics 14th February 2025

This week's edition of our Crypto DeFi Analytics. Solana' continues to outperform Ethereum in fee generation. Hourly Average Cost to Transfer ETH (21,000 Gas) drops to the lowest levels seen this month and liquidations across Aave and Compound are negligible.

February 14, 2025

Volatility Review January 2025

Since the start of the year, BTC and ETH weekend activity has been notably reactive, with recent sell-offs driven by macroeconomic factors such as Trump’s tariff policies, speculation about a strategic Bitcoin reserve, and competition from AI-driven disruptors like DeepSeek. Notably, BTC and ETH have acted as leading indicators for broader market movements, reacting more swiftly and sharply to economic and geopolitical developments than traditional equities.

February 14, 2025

Crypto Markets Daily Feb 14 2025

Headline PPI in the US came in above expected, with the final demand year-over-year figure increasing to 3.5% in January. President Trump has announced his 'Fair and Reciprocal' tariff plan designed to introduce a round of bilateral reciprocal tariffs with US trade partners. In DeFi news, Trump backed World Liberty Financial continues its large-scale crypto purchases, and the Ethereum Foundation has made additional moves to bolster its on-chain DeFi activity.

February 14, 2025

Crypto Markets Daily Feb 13 2025

US CPI exceeded economist expectations on all counts, with the YoY headline figure rising to 3.0%, against the expected 2.9% and core YoY prices increasing to 3.3%, above the expected 3.1%. Chair Powell reiterated the Fed's intention to keep rates restrictive following the CPI release. BTC initially dropped on the news, though pared back the losses through the day.

February 13, 2025

Crypto Markets Daily Feb 12 2025

MicroStrategy resumes its Bitcoin buying, announcing its purchase of 7,633 bitcoins after a two week break. ADA has outperformed the top 10 altcoins by market-cap, bolstered on by Grayscale's ADA ETF filing. BTC and ETH skew levels have returned back to a positive territory.

February 12, 2025

Crypto Markets Daily Feb 11 2025

MicroStrategy resumes its Bitcoin buying, announcing its purchase of 7,633 bitcoins after a two week break. ADA has outperformed the top 10 altcoins by market-cap, bolstered on by Grayscale's ADA ETF filing. BTC and ETH skew levels have returned back to a positive territory.

February 11, 2025

Bybit x Block Scholes: The Altcoin Rotation: Why and When Altcoins Outperform Bitcoin

The elusive "altseason" phenomenon—when altcoins historically outshine Bitcoin in market cycles is one of the most anticipated moments in all historical crypto cycles. Unlike past booms, 2024 has bucked the trend, with BTC holding strong while altcoins struggle to steal the spotlight. Ethereum’s underperformance, institutional dominance via ETFs, and a pre-halving all-time-high rally may have disrupted the usual capital rotation. Yet, increasing stablecoin supply, supply-demand factors and memecoin speculation hint that a belated altseason-like frenzy could still be ignited — if the right spark catches fire.

February 10, 2025

Crypto Markets Daily Feb 10 2025

China confirmed its retaliatory tariffs on U.S. imports including 15% levies on liquid natural gas and coal. President Trump announced some more tariffs of his own too, which coincided with a temporarily pullback in BTC's spot price. CPI in China rose more than expected, though seasonal factors likely skewed the data.

February 10, 2025

DeFi Analytics 7th February 2025

This week's edition of our Crypto DeFi Analytics. A bittersweet week for Ethereum: network demand surges, surpassing Solana in fees, but ETH spot crashes 25%. Uniswap V3 hits a 2025 high in transaction count, while over $15M in positions are liquidated across Aave and Compound.

February 7, 2025

Block Scholes x Bybit Crypto Derivatives February 7th 2025

Another week, another Monday crypto risk-off event that continues its recent correlation to equities. However, despite last week’s sell-off, BTC outperformed relative to the wider crypto market, experiencing a far less steep sell-off, as reflected in its derivatives markets positioning. Options markets priced short-tenor volatility higher before the inversion of the term structure resolved remarkably quickly. ETH, in contrast, saw a much sharper inversion as short-tenor options spiked significantly higher alongside realized volatility. Perpetual swap contracts lost much of their open interest in a liquidation event that some, including Bybit CEO Ben Zhou, estimated were likely as high as $10B. The sudden bearishness was reflected in funding rate data, with altcoins seeing a more persistent and negative funding rate in the days since the crash than BTC did.

February 7, 2025

Crypto Markets Daily Feb 07 2025

Labour productivity in the U.S. ticked up at an annual rate of 2.3% between 2023 and 2024 as Dallas Fed President suggests the FOMC may need to hold interest rates at their current level for "quite some time". President Trump's Media Group announces plans to launch its Bitcoin Plus ETF. Bitcoin's implied vol term structure continues to steepen.

February 7, 2025

Crypto Markets Daily Feb 06 2025

BlackRock announces plans for a Bitcoin ETP in Europe and Commissioner Hester Pierce announced her key goals for the Crypto Task Force. Institutions are buying the ETH dip with the third-largest single-day spot ETF inflows since launch and ETH's implied vol term structure disinverts.

February 6, 2025

Crypto Markets Daily Feb 05 2025

The JOLTS report showed a U.S. economy still in a stable, low-hiring, low-firing state with quits and layoff rates holding steady. Bitcoin continues to range between $96K and $100K as Crypto Czar provides update on a Strategic Bitcoin Reserve. ETH's term structure remains significantly inverted compared to Bitcoin's much flatter shape.

February 5, 2025

Crypto Markets Daily Feb 04 2025

President Trump announced a 30 day pause on his tariff program against Canada and Mexico which brought a well needed relief rally in cryptocurrencies. That didn't last long as China announced its own retaliatory measures against the U.S. ETH's implied vol term structure remains inverted, compared to BTC's flatter term structure. The $2B liquidation event of yesterday hasn't stopped ETH Spot ETF inflows however. Uniswap launches v4.

February 4, 2025

Crypto Markets Daily Feb 03 2025

President Trump's long awaited tariff program has caused a knee-jerk reaction in crypto markets which have led the risk-off move. BTC temporarily crashed to $91K with both BTC and ETH's term structures inverting. ETH perp funding rates have dropped to -0.07%, and a basket of the Trump Trade altcoins have posted double digit losses.

February 3, 2025

DeFi Analytics 31st January 2025

This week's edition of our Crypto DeFi Analytics. Solana continues to cement its year-to-date dominance in fee generation compared to Ethereum with a notable divergence. Ethereum's blob gas usage remains stable and Uniswap V3 sets a new January high for transaction count.

January 31, 2025

Crypto Markets Daily Jan 31 2025

The U.S. grew by less than expected in Q4, but still recorded a robust figure that pushed 2024 yearly growth to 2.8%. President Trump once again threatened 100% tariffs on BRICS nations if they attempt to create a BRICS currency or replace the U.S. dollar. Crypto Spot ETFs are back to positive inflows, ending a disappointing week. Apollo Global Management announced a partnership with Securitize to tokenise shares of its Apollo Diversified Credit Fund on various blockchain networks. Rollman Management Digital, a private investment firm, has invested $20M into Elastos.

January 31, 2025

Block Scholes x Bybit Crypto Derivatives January 31st 2025

Markets experienced a significant risk-off event at the beginning of this week, as DeepSeek’s LLM announcement coincided with sharp declines in major indices and across crypto markets, despite a direct and obvious impact on the value of the crypto-asset market. Although spot markets saw a volatile selloff, open interest in perpetual swaps has remained stable, with funding rates briefly flipping negative before partially recovering. Options markets saw a surge in trading volume amid the selloff, but forward-looking volatility expectations declined. However, positioning over a longer horizon remains the same — longer dated options positions indicate a bullish sentiment.

January 31, 2025

Crypto Markets Daily Jan 30 2025

The FOMC voted unanimously to leave the FFR unchanged at 4.25-4.5% and Chair Powell highlighted that following 100bps of rate cuts since September 2024, Fed policymakers do not "need to be in a hurry to adjust" the policy stance. BTC initially fell following the press release, then rallied at Powell took to the podium. The Bank of Canada continued its 6th consecutive rate cut, citing "major uncertainty" regarding tariffs.

January 30, 2025

Crypto Markets Daily Jan 29 2025

BTC’s rangebound movements is accompanied by slower activity in derivatives markets. Implied vol is sideways and the term structure is flat. The recent shakeout has not affected long-tenor vol smiles however, which still indicate a preference for OTM calls. Czech's Central Bank Governor announces plans to add Bitcoin to the nation's official reserves and Metaplanet has plans of its for its corporate Bitcoin treasury.

January 29, 2025

Crypto Markets Daily Jan 28 2025

The DXY rallied on the back of President Trump's plans to tariff steel, copper, pharmaceuticals, and foreign computer chips. Nvidia fell 17% yesterday amidst a wider equities decline, but BTC has recovered above the $100K mark. Short-tenor vol smiles are put skewed and spot ETFs saw their biggest outflows since January 8, 2025. The FOMC voting committee welcomes some new members ahead of its meeting tomorrow.

January 28, 2025

Crypto Markets Daily Jan 27 2025

BTC fell to $97K amidst a wider Trad-Fi decline. Skew levels have now dropped towards OTM puts for short-tenors with funding rate close to 0%. China's DeepSeek LLM is causing concerns about U.S. tech stock valuations. Looking ahead, the Fed and the ECB are meeting through the week amongst a slew of macro data including U.S. GDP and PCE inflation.

January 27, 2025

DeFi Analytics 24th January 2025

This week's edition of our Crypto DeFi Analytics. Trump's inauguration week made it's mark on DeFi metrics. With the official launch of $TRUMP and $MELANIA, exclusively on the Solana network, Solana saw a spike of approximately $31M fees generated in one day. Ethereum saw a similar increase in network demand on Jan 19, reflected by a spike of gas fees pricing. Uniswap v3 paints a similar picture of increased transaction count and blob gas usage remains steady around 400k.

January 24, 2025

Block Scholes x Bybit Crypto Derivatives January 24th 2025

Trump’s inauguration on Jan 20, 2025 was preceded by the launch of two Trump family meme coins, TRUMP and MELANIA, which quickly amassed billions of dollars in market capitalization. However, the rumors that a strategic Bitcoin reserve would be among the flurry of executive orders signed by Trump on day one of his administration are what saw derivatives markets positioning shift strongly toward a bullish outcome — inverting the term structure of volatility, raising funding rates levied on long positions and tilting short-tenor volatility smiles toward calls. When that bullish outcome wasn’t delivered, implied volatility levels fell, despite a pickup in realized volatility. However, the bullish skew toward OTM calls remained.

January 24, 2025

DeFi Analytics 10th January 2025

This week's edition of our Crypto DeFi Analytics. Ethereum network activity surged early in January, with gas fees spiking before stabilizing at lower levels, while blob gas usage remained steady around 400k. Excess blob gas saw a sharp drawdown this week but quickly rebounded, reflecting sustained activity on the network. Uniswap V3 continues to sustain trading activity amid a volatile market.

January 10, 2025

Block Scholes x Bybit Crypto Derivatives January 10th 2025

Bitcoin's brief climb above $100K to start the year quickly faltered as economic data cast doubt on sustained U.S. interest rate cuts, fueling inflation concerns and weighing on risk assets. Derivatives sentiment failed to support the 100k move and realized volatility collapsed amid lower trade volumes, even as open interest levels held steady. Despite the steep volatility term structure, shorter-term implied volatility is still trading at a significantly higher level than the level of realized volatility. End of December 2024 marks the largest premium of forward-looking volatility since the U.S. elections, despite no clear event risk.

January 10, 2025

Volatility Review December 2024

Despite the largest single-day expiration events on Dec 27, 2024, the volatility of BTC, ETH and SOL spot prices has been decreasing, rather than spiking, defying expectations of a volatile event driven by a delta-hedging unwind. In our December review, we cover why this was the case, highlighting that only $65.53M of the $350M BTC options expired in-the-money (ITM), including calls with strikes far above the spot price and puts below it.

January 8, 2025

DeFi Analytics 3rd January 2025

This week's edition of our Crypto DeFi Analytics. Ethereum gas fees spiked to $5 as demand rebounded post-holidays. Excess blob gas dipped slightly but recovered to 55M as Layer 2 activity resumed. Uniswap V3 also saw a holiday trading slowdown, now stabilising.

January 3, 2025

Block Scholes x Bybit Crypto Derivatives January 3rd 2025

Far from the explosion in volatility expected by some commentators, December’s end-of-year options expiration event has resulted in a collapse in realized volatility levels back to the bottom of their December range. Perpetual swap open interest levels remained consistent throughout the event, suggesting that perp markets weren’t used to hedge a significant proportion of the delta of the expired options contrasts, perhaps explaining the lack of volatility that materialized as they expired.

December 31, 2024

DeFi Analytics 20th December 2024

This week's edition of our Crypto DeFi Analytics. We highlight the stabilisation of gas fees on Ethereum's network with no significant spikes in demand. Meanwhile, blob gas usage remains elevated at 400k, revealing ongoing and sustained Layer 2 demand for data uploads. An insight into DeFi activity is marked by Uniswap V3 transaction volume on Arbitrum and liquidation activities across Aave and Compound.

December 20, 2024

Block Scholes x Bybit Crypto Derivatives December 18th

BTC’s spot price has recorded yet another all-time high, but unlike previous records this quarter, derivatives markets haven’t reflected the same leveraged bullish positioning. This is likely a result of the reset in leverage earlier last week, which has seen funding rates return to “normal” levels across the board, a letup in the growth of futures yields and a slightly less exuberant skew toward calls in options.

December 19, 2024

DeFi Analytics 13th December 2024

This week's edition of our Crypto DeFi Analytics. We highlight Ethereum's increased network demand and the change in hourly average gas fees burnt per block and excess blob gas fees associated with this. An insight into DeFi activity is marked by Uniswap V3 transaction volume on Arbitrum and liquidation activities across Aave and Compound.

December 13, 2024

Block Scholes x Bybit Crypto Derivatives December 12th

BTC and ETH’s oscillating spot levels over the last week below psychological price targets have left their mark on derivatives markets. A pullback in spot price was exacerbated by a spate of liquidations of over-leveraged long positions in perpetual swaps markets. The aftermath sees a fall in open interest in the instruments, particularly in ETH markets, and a reset of previously overheated funding rates to much lower (but still positive) levels across the board.

December 12, 2024

DeFi Analytics 6th December 2024

This week's edition of our Crypto DeFi Analytics. We highlight Ethereum's surging network activity: burnt gas fees neared 2 ETH per block alongside transfer costs peaking at $10 amid a growing ETH spot price. Excess blob gas remained elevated, exceeding 70M- a factor of consideration for Layer 2s. An insight into DeFi activity is marked by Uniswap V3 transaction volume on Arbitrum and liquidation activities across Aave and Compound.

December 6, 2024

Block Scholes x Bybit Crypto Derivatives December 5th

Following several repeated attempts, BTC has finally breached its $100K price target. The effect on derivatives markets is a clear increase in bullish positioning on top of the resilient positive sentiment that we had commented on in the build-up to the move. Perpetual swaps and futures markets reflect a persistent desire for further upside exposure. Short-tenor implied volatility, which has repeatedly inverted the term structure in tandem with spot price rallies, has risen once again as traders rush for exposure to the rally through options.

December 6, 2024

Volatility Review November 2024

November’s turbulent spot price movements had a pronounced impact on derivatives markets, highlighting notable trends in crypto volatility. The term structure of at-the-money implied volatility became a focal point in the weeks leading up to the election on November 5, 2024, as short-term implied volatility surged to levels approximately 25 percentage points higher than post-election expirations. This spike, coupled with bullish positioning observed in perpetual swaps and futures markets, underscored a strong demand for optionality at expirations near the election date, reflecting traders’ singular focus on the event's outcome. In the two weeks following the election, the term structure continued to oscillate between inversion and steepness, signaling a highly responsive market that rapidly adjusted to shifting sentiment and evolving conditions.

December 5, 2024

Bybit x Block Scholes: A Journey of Growth and Milestones Toward Becoming the No. 2 Crypto Exchange

As Bybit celebrates its sixth anniversary, it stands as a powerhouse in the crypto exchange landscape, commanding a 12.21% market share and surpassing 50 million users in 2024. With daily spot trading volumes exceeding $10 billion and perpetual swaps also dominating, Bybit’s journey reflects both its growth and the evolving dynamics of crypto markets. We explore Bybit's growth story to discover trends in BTC and altcoin trading, patterns in weekly liquidity and volatility, how institutions are reshaping the space, and what this means for your next big move. Read now to stay ahead of the market!

December 2, 2024

Block Scholes x Bybit Crypto Derivatives November 27th

A bounce-off of the key $100K price level for BTC has slowed growth in bullish positioning this week, but it hasn’t yet resulted in a sharp spate of liquidations or position closing. ETH has sustained its outperformance over the week, following the announcement of SEC Chair Gary Gensler’s January 2025 departure, and is joined in its outperformance by a swath of large-cap altcoins that had previously come under the scrutiny of the SEC under Gensler’s leadership, as reflected in bullish funding rates paid by long positions for the privilege of leveraged long exposure through the contract.

November 29, 2024

Block Scholes x Bybit Crypto Derivatives November 20th

Spot prices have surged in the two weeks since the Nov 5, 2024 U.S. elections, sending BTC far beyond its all-time price highs, while ETH has lagged behind. The implied volatility term structure has inverted once more alongside movements in spot, but longer-dated tenors remain relatively range-bound. Derivatives market indicators have shown persistently strong positive sentiment: perpetual funding rates remain constantly positive, open interest for futures contracts is growing rapidly and options skew is stubbornly positive.

November 22, 2024

Bybit x Block Scholes: Takeaways from the U.S. Election and What to Look for Next

Donald Trump’s election signals a pivotal shift in cryptocurrency policy, moving from skepticism to advocacy, which may redefine the regulatory landscape. The election result triggered immediate and substantial reactions in the crypto markets, particularly evident in Bitcoin's price surge, reflecting heightened investor optimism. A Republican-controlled U.S. Congress could lead to clearer and more favorable regulations for digital assets, fostering innovation and investment in the sector. As Bitcoin's dominance persists, emerging regulatory clarity may catalyze a resurgence in altcoins, particularly for platforms like Ethereum and Solana, which are poised to benefit from a pro-crypto environment.

November 20, 2024

Crypto Derivatives 19th November 2024

Derivatives markets continue to reflect the bullish momentum of recent weeks. Spot yields are approaching the positive highs observed last week, signalling robust demand as traders are willing to pay a premium for leveraged long exposure via the futures contracts. Skew levels and perpetual contracts funding rates remain firmly positive, reinforcing the optimistic sentiment and indicating that market participants are seeking exposure to upwards price action. Meanwhile, implied volatility remains within a range-bound pattern, while the term structure remains inverted. Current levels of inversion have yet to surpass the heightened activity seen during the pre-election period, but remain closely linked to spot movements.

November 19, 2024

DeFi Analytics 14th November 2024

This week's edition of our Crypto DeFi Analytics, This week we highlight the surging demand for blob gas, with the hourly average excess blob gas per Ethereum block reaching 60-80M. Meanwhile, the Beacon Chain deposits remained steady at 32.4M, with ongoing withdrawals and inflows balancing each other out. Ethereum’s gas fees saw a correction, aligning with the post-election rally in ETH’s spot price. The average cost to transfer ETH spiked to $3.40, with burnt gas fees returning to early October levels. An insight into DeFi activity is marked by Uniswap V3 transaction volume on Arbitrum and liquidation activities across Aave and Compound.

November 15, 2024

Crypto Derivatives 12th November 2024

One week after the election, spot prices have shown remarkable strength, with BTC reaching new all-time highs following an explosive rise. ETH, while not yet at record levels, has also gained upward momentum, displaying a steady increase since the election date. In the derivatives market, sentiment has strengthened for both tokens: futures implied yields, perpetuals funding rates, and skew all indicate a highly positive outlook. ATM implied volatility, which initially dropped after the election event risk passed, has since surged, inverting the term structure. Both BTC and ETH now benefit from a powerful combination of spot price gains and robust bullish derivatives activity, signalling strong demand to participate in further upside potential.

November 12, 2024

Block Scholes x Bybit Crypto Derivatives November 6th

As the outcome of the 2024 U.S. presidential election became clear, short-dated implied volatility levels dropped significantly for both BTC and ETH, with term structures flattening for BTC and evolving into a steep curve for ETH. Leveraged positions, which had unwound during pre-election spot volatility, have since rebounded, leading to a rise in open interest across both perpetuals and futures. Despite the passing of the event risk, positioning across all markets remains close to all-time highs, indicating that traders are willing to continue to pay for leveraged long exposure as BTC trades at all-time highs.

November 11, 2024

DeFi Analytics 7th November 2024

This week's edition of our Crypto DeFi Analytics, November has seen the Beacon Chain balance drop as withdrawals have dominated, while Ethereum’s on-chain activity slowed despite an increase in it's spot price following the US election. Separately, Solana continues to near Ethereum in gas fee generation. There was an increased demand in blob gas usage on Ethereum with Hourly Average Excess Blob Gas per Ethereum Block maintaining spikes of 70-80M. DeFi activity shifted, reflected in Uniswap V3 transactions on Arbitrum and liquidations across Aave and Compound.

November 7, 2024

Crypto Derivatives 5th November 2024

In the days leading up to the election we’ve observed a decline in both futures implied yields and perpetuals funding rates. With election-related uncertainty and recent spot price fluctuations, it’s clear that traders are now hesitant to pursue leveraged exposure in BTC and ETH as aggressively as they did last week, when the buildup of leverage was evident. This points to a reduced appetite for high-stakes directional bets, as BTC’s implied volatility remains elevated and continues to rise. Despite this, BTC’s volatility smiles keep signalling a bullish sentiment. In contrast, ETH’s implied volatility levels have slowed and moved sideways over recent days, with options’ skew reflecting a more bearish short-term sentiment. The spotlight therefore remains on BTC as the election cycle reaches its conclusion.

November 5, 2024

Block Scholes x Bybit Crypto Derivatives October 30th

As the U.S. election approaches, short-tenor implied volatility has surged to multi-month highs, outperforming the far-end of the term structure and resulting in a significant inversion in the term structure. This indicates strong moves in positioning ahead of the election early next week, reminiscent of the same pattern observed prior to the ETF launch in January. ETH derivatives suggest that the second-largest cryptocurrency is likely to continue its long-standing trend of underperformance amid event risk, trailing BTC across all metrics and carrying a 10-point volatility premium over BTC.

November 1, 2024

DeFi Analytics 31st October 24

This week's edition of our Crypto DeFi Analytics, October saw stable Beacon Chain balances as withdrawals matched deposits, while Ethereum’s on-chain activity slowed alongside a range-bound spot. On October 28, Solana’s gas fee generation exceeded Ethereum's, collecting $2.54M to Ethereum's $2.07M. Blob gas usage on Ethereum peaked, with excess blob gas spiking past 50M. DeFi activity shifted, reflected in Uniswap V3 transactions on Arbitrum and liquidations across Aave and Compound.

October 31, 2024

Crypto Derivatives 29th October 2024

The bullish pre-election positioning that we saw building up earlier in October has continued with vigour over the last 3 days. Futures-implied yields, perpetual swap funding rates, and now implied volatility have risen to months-long highs, with short-tenor option expiries out-performing to invert the term structure of volatility in a similar manner to the shape we observed ahead of the ETF launch in January. ETH derivatives indicate an expectation that the second largest crypto-currency will continue its years-long trend of under-performance through the event risk, lagging BTC in all metrics and assigning a 10 point volatility premium over BTC, but echo the trend of increasing bullish sentiment that we see expressed across markets.

October 29, 2024

Block Scholes x Bybit Crypto Derivatives October 23rd

With only two weeks left until the 2024 U.S. elections, ATM implied volatility levels have increased largely for 14-day tenor options, even as overall implied volatility levels have been trending downward, resulting in a very steep term structure. Sentiment remains bullish, as indicated by key metrics: open interest for both futures and call options is rising, and funding rates are positive for all monitored tokens, not just BTC and ETH. While the focus is primarily on majors BTC and ETH leading up to the election, traders are therefore anticipating a broader impact on the entire crypto ecosystem.

October 25, 2024

Crypto Senti-Meter V2: A Derivatives Sentiment Index

Block Scholes' Crypto Senti-Meter aggregates several measures metrics to measure the sentiment expressed by crypto-asset derivatives markets. Our index methodology leverages 4 years of advanced derivatives analytics, and is strongly correlated with movements in spot prices. In this second iteration of the index, we measure changes in momentum in derivatives market sentiment by evaluating the most recent value against its recent history.

October 25, 2024

Crypto Derivatives 22nd October 2024

The positive sentiment observed last week has consolidated, with bullishness reflected across key metrics for both majors. Perpetual funding rates remain positive, implied futures yields continue to show elevated levels and an inverted term structure, and the implied volatility smiles’ skew remains strongly tilted toward calls across tenors. The upcoming election is still impacting market dynamics greatly, with implied volatility for 14-day tenor options in both ETH and BTC rising, now approaching levels seen in longer-tenor options. At the same time, volatility at the far end of the term structure continues to trend sideways, only showing a slight decrease for BTC options. Notably, 7-day tenor options saw a spike in volatility last week, now having dropped sharply and sitting lower than last week.

October 22, 2024

Block Scholes x Bybit Crypto Derivatives October 16th

Despite the recent spot price rally, the extreme dislocation between long- and short-dated implied volatility continues. Market participants are therefore positioning more around post-election expectations than to the recent bullish movements in spot prices, which have led to a rise in realized 7-day volatility that now matches implied volatility levels for 30-day-tenor options. Bullish reactions to spot price activity can be observed, especially in perpetual funding rates, which now trade positively across almost all tokens.

October 18, 2024

A US Recession through the lens of Polymarket

In this report we will explore the probability of a US recession based on on-chain Polymarket data. We will then also identify some differences in the probabilities between several related Polymarket markets that track the path of monetary policy by the Fed, and compare them to similar measures in traditional finance markets. Our goal is to highlight the discrepancies in sentiment based on data from on-chain and off-chain markets and identify some dislocations between markets.

The Lowest Levels of Vol in Over a Month

BTC’s options markets are pricing-in their lowest level of implied volatility in over a month as options with a 7-day tenor trade with an implied volatility of just 35%. Despite continuing to price in a premium over BTC, ETH’s front-end implied volatility has trended down too. Equity markets were largely unmoved yesterday as President Trump continues to clash with Chair Powell over the pace of monetary policy in the US. US treasuries pared their gains on Thursday after a three-day rally, with the yield curve steepening further: the yield on the 10Y and 30Y tenor rose by 5 and 6bps, respectively.

No, With An Explanation

Chair Powell's comments that the Fed is still "well positioned to wait for greater clarity" and denying of a Fed Put in stock markets sent equities sinking yesterday. BTC briefly fell but regained its position as the crypto market trades in a sea of green today. BTC and ETH front-end ATM implied volatility trade at their lowest levels all month, following a drop in realized volatility for both assets. US retail sales saw their biggest monthly gains in over two years, as consumers try to front-run Trump's tariffs and the Bank of Canada's quarterly monetary policy report outlined a potential scenario where US tariffs induce a “significant" year-long recession in Canada.

It's Calmest Before The Storm?

A calmer trading session yesterday which saw 10Y treasury yields fall slightly and US equities end the day close to their opening prices was disrupted when Nvidia announced it faces restrictions on the export of its H20 chips to China. BTC spent the day steadily chopping downwards and its implied volatility across tenors declined, led by moves at the front-end. In an interview with Yahoo Finance, Treasury Secretary Scott Bessent shrugged off speculations that China has been selling US treasuries and added that he thinks the Fed would intervene “if treasuries hit a certain level." In DeFi, Sui has expanded its partnership with Babylon Labs to launch a Bitcoin Secured Network.

The Fifth Inning

US treasuries end a five day consecutive selloff as the 10Y yield declined by 10bps yesterday. Treasury Secretary Scott Bessent believes the selloff was not due to a "dumping" of treasuries by foreign holders. The relief in bond markets extended to equities and crypto, with BTC trading close to $86K. Its term structure of volatility has normalized while ETH's term structure is now flat, having been inverted for most of the month. Alternative safe haven assets continue to outperform with gold up 8% since mid-March, coinciding with a significant explosion in trading on the Shanghai Futures exchange.

Nobody Is Off The Hook

President Trump’s mixed tariff signals continue as his administration announced a tariff exemption for an array of consumer electronics before Trump responded on Sunday evening that “NOBODY is getting ‘off the hook’”. The continued uncertainty around tariffs saw the 10Y US treasury yield surge to an intraday peak of 4.56% on Friday and the US dollar is down close to 7% since mid-March. BTC’s term structure of volatility is flat at longer-tenor vol followed the front-end up and the 25delta put-call skew ratio has recovered significantly over the week. ETH futures markets for 1 week expiries are still trading at a discount to spot, albeit that discount has narrowed since April 12 where the annualized yield was -6%.

Vol is Abating but Xi and Trump’s Tariff War is Not

The US CPI report for March showed inflation beating expectations on all counts with core CPI at 2.8%, the lowest since 2021. That did little to change market sentiment however. After Wednesday's tariff pause induced rally, an exodus of selling across US equities, treasuries and the dollar was in full flow on Thursday. The USDCHF sunk to its lowest levels since 2011. While BTC’s inverted term structure has abated, escalation between China and the US has not, with the Chinese Finance Ministry announcing a further increase in levies against US goods to 125%. Volatility smiles at all tenors remain skewed towards puts, with short-dated optionality continuing to express a far stronger bearish sentiment.

America Blinks First…

Markets have U-turned from weeks of negative price action as President Trump reversed on his "reciprocal tariffs" policy only a week after their announcement. The S&P 500 posted its best day since 2008 and BTC has rallied to $82K. Its term structure inversion has now abated and is close to a flat curve, matched with a major recovery up in put-call skew, particularly for shorter tenors. Separately, Paul Atkins has been officially confirmed as the new SEC chair following a 52-44 Senate Vote.

Good Medicine Is Bitter?

So far this week both US equities and treasuries have been selling off. Those selloffs accelerated following President Trump's announcement of 104% tariffs on Chinese imports. Concurrent to the equity selloff which has seen the SPX fall 12% lower than before Trump’s “Liberation Day” tariffs, the 30Y yield is now at its highest since November 2023 and 10Y yields have surged over 30bps this week so far. The MOVE index, a gauge of US Treasuries’ implied volatility, has risen to its highest levels since October 2023 and similarly, at-the-money implied volatility for BTC has spiked upwards over the past 24 hours across all tenors too, particularly at shorter-maturities which has further steepened the inverted term structure.

Is Bitcoin Finally Decoupling from Equity Markets?

This is not another post about tariffs and a global economic meltdown. We’re only interested in exploring these events through a crypto lens, and ultimately, what they mean for crypto assets.

You can intimidate everybody

Volatile moves in both US bond markets and equity markets saw the 10-year treasury yield rally 14bps following a drop below 4% earlier in the day. That move meant 10-year yields are now back to their "Liberation Day" levels while US risk-on equities trade 10% lower. Crypto markets have bounced back slightly so far today however in derivative markets, both BTC and ETH volatility smile skews are still indicative of put demand. The most recent inversion of the term structure of at-the-money implied volatility has also relented – something we have seen more than a few times over the last three months. The first XRP-based ETF in the U.S. market is also set to start trading today on NYSE Arca, offering leveraged 2x daily exposure to XRP.

Lagged Move or Canary in the Coal Mine?

Last Friday marked the worst two day performance by the S&P 500 since 2020, while the Nasdaq-100 officially slid into a bear market. BTC however held up for the first half of the weekend, rallying from $82K to $84K amidst the US Treasury Secretary stating it is "becoming a store of value". However, that brief decorrelation was exactly that -- brief. Since Sunday, crypto markets are down with both BTC and ETH's term structures significantly inverted. Puts are in high demand with BTC’s 25delta skew briefly dropping to its lowest since March (a level that, excluding March, was last seen in April 2024). Japan’s Nikkei 225 is down 7% and the Hong Kong Hang Seng index has fallen by its most since 2008 as the fallout from tariffs extends across the world.

The Highest Weighted Average Tariff Rate in a Century

After the unveiling of his reciprocal tariffs, the US weighted average tariff rate is now the highest it has been in a century. The S&P 500 Index experienced its largest single day loss since June 2020 and BTC fell to $81K. Despite those moves, President Trump claimed "the markets are gonna boom". That's clearly fallen on deaf ears in derivatives markets where BTC and ETH volatility smiles are still majorly skewed towards puts. Separately, Coinbase has filed with the CFTC to launch a new XRP futures contract which, if approved, will launch on April 21.

No Positive Reciprocation From Markets

President Donald Trump finally announced his reciprocal tariff plans, which will see the US apply a baseline 10% tariff on all exporters to the country, with customised duties on top of that baseline. Trump has promised “these tariffs will give us growth like you haven’t seen before". Financial markets have not reciprocated that sentiment however. US equity futures had fallen as much as 4% within the announcement with BTC moving in the same direction. With it, its term structure of volatility briefly inverted. Short-tenor skews have once again crashed down towards puts, with demand lop-sided towards further protection against downward moves. For BTC, only tenors above 4 months hold a premium towards calls.

Weak Data Continues…

A slew of weaker economic data from the US continues into this week as the ISM Manufacturing Index, JOLTS, and S&P Global Manufacturing PMI readings all came in below expectations. Despite those weaker readings, US equities ended the day higher. Treasuries options markets show the 1-month tenor 25-delta put-call skew ratio for the 10Y, 5Y and 2Y treasury notes are at their highest levels towards calls since August 2024 and in crypto options markets, ETH's term structure still remains inverted. In DeFi, stablecoin issuer Circle has filed for an IPO in the US.

American Bitcoin

With "Liberation Day" on the horizon, assets across the board went through a whirlwind of prices yesterday. The S&P 500 and Nasdaq-100 both dropped sharply at their opening, before paring those losses back. Crypto derivatives markets saw much of the same rollercoaster moves with implied volatility levels having plunged down following their explosion upwards yesterday. That has resulted in a flatter term structure for BTC compared to yesterday, whilst ETH's term structure is still inverted. That drop in volatility comes as BTC spot price and ETH spot price currently trade 2% and 4% higher on the day. Separately, Eric and Donald Trump Jr. have partnered with Hut 8 to launch a large-scale U.S. bitcoin-mining venture named American Bitcoin.

Crypto Volatility and Tariff Fears

Asian equity markets plunged this morning amid renewed fears of a US-led trade war, as President Trump's ambiguous tariff threats rattled investor sentiment across the region. Crypto markets faced heightened turbulence, with short-dated volatility surging and ETH continuing its multiyear underperformance versus BTC. Meanwhile, regulatory and technological developments include the proposed California bill supporting crypto payments and the UAE's anticipated Q4 launch of its Digital Dirham for retail use.

World Liberty Financial — A Trump Backed Project

World Liberty Financial is a yet-to-be-released DeFi platform backed by President Trump (the ‘Chief Crypto Advocate’ for the project). In this report, we take a deep dive into everything World Liberty Financial – covering the Goldpaper (the President’s version of a crypto whitepaper), the tokenomics of the WLFI token, the revenue model of the business, and some of WLF’s current partnerships. Along the way, we will unravel some interesting insights behind the intention and potential end-goal of the Trump family’s crypto endeavour.

Introducing Rho Protocol

Rho Protocol is the first crypto-native rate derivatives exchange. Rho rates futures are financial derivatives which allow users to trade fixed-to-floating rate swaps on BTC and ETH perpetual futures funding rates and on ETH staking rates. In this report, we uncover how exactly Rho Protocol works.

What A Week!

We’ve previously spoken about idiosyncratic factors in Bitcoin’s favour that could break its correlation to equities – the post-halving halving impact on supply, the ETF effect on demand, and a positive regulatory environment. But wow, what a week – Bybit’s exchange hack, record outflows in the Spot Bitcoin ETFs, and the 90% plus drops in a multitude of Solana memecoins launched by high-ranking officials across different nations would have been enough to damage bullish sentiment without risk-on sentiment tanking across all assets.

February 28, 2025

Breaking Bitcoin’s Correlation With Macro

Historically BTC's returns have been driven by three main drivers. One of these drivers, mainly the macroeconomic backdrop is posing strong headwinds for risk-on assets. With BTC's strong correlation to US equities, one would expect it too could suffer from the more hawkish macro environment. In this report we delve into the remaining two drivers that are supporting Bitcoin and pose an argument that it could potentially detach from its macro correlation with US equities in the long-term as a result of these unique, idiosyncratic factors.

February 18, 2025

Ripple (XRP) - The Fundamentals

Ripple’s native coin XRP, has resurged from relative obscurity to become the third-largest cryptocurrency by market capitalization, overtaking prominent contenders like Solana. This report delves into Ripple’s utility, distinguishing between Ripple’s native coin XRP, Ripple’s global payment system RippleNet, and the blockchain they are both built on, the XRP Ledger (XRPL). We also deep dive on the mechanics of the XRP Ledger and the additional utility it provides for businesses. With its ability to challenge traditional payment systems like SWIFT, Ripple is once again positioned as a pivotal player in the financial technology space.

February 3, 2025

Crypto Markets Daily Jan 24 2025

President Trump makes good on his promise to make the U.S. the 'crypto capital of the world' with the announcement of two major crypto policies. Spot price is whipsawing, and derivatives sentiment for options is still skewed towards calls for short and long-tenors. The jury is still out on whether a Strategic Reserve means piling up on bitcoins only, or will include altcoins too, in the chance one will be created at all.

January 24, 2025

Crypto Markets Daily Jan 23 2025

The wider crypto market seems to be hinging on some news from President Trump to escape its current tempered sentiment. BTC short-tenor skews are close to 0% and our Senti-Meter Index has fallen from its euphoric levels. ETH struggles to outperform as it has on previous SEC news, despite a new crypto taskforce being announced and the ETF-filing mania continues.

January 23, 2025

Crypto Markets Daily Jan 22 2025

The SEC has unveiled a dedicated cryptocurrency task force led by Commissioner Hester Peirce, aiming to establish “comprehensive and clear” digital asset regulations in collaboration with other agencies like the CFTC. This announcement, following a brief market dip around President Trump’s inauguration, has reinvigorated market sentiment, with BTC holding steady at $105K and ETH seeing modest gains. Despite subdued implied volatility and a flattening term structure, realized volatility has surged to pre-election levels. Meanwhile, excitement builds around new ETF filings, including high-profile crypto and even memecoins, as Solana’s price momentum continues. In DeFi, Uniswap Labs is poised to deploy Uniswap v4, promising further innovation in the sector.

January 22, 2025

Crypto Markets Daily Jan 21 2025

President Trump's inauguration speech fell short of any mention of BTC or cryptocurrencies which has seen BTC price drop from its $109K level. BTC skew levels are still assigning a volatility premium for calls over puts, however funding rates have fallen significantly. The DXY fell as Trump also failed to announce any immediate tariffs.

January 21, 2025

Crypto Markets Daily Jan 20 2025

President Trump launched his very own crypto memecoin, and the incoming First Lady followed in pursuit. The result was the Solana token reaching new ATHs, Solana DEXs registering record trade volume and then a subsequent partial network crash which saw the USDT/ USDC pair depeg and Solana fall down to $232. BTC crashed down to $99K before rallying to its own new ATHs amidst speculation of a SBR. Derivatives metrics by all counts are showing extreme euphoria for BTC, but less so for ETH.

January 20, 2025

Crypto Markets Daily Jan 17 2025

Derivative and spot markets have been quick to react to the the recent speculation regarding President-elect Trump's executive crypto order. Futures yields and perp funding rates have skyrocketed with implied vol levels reflecting similar sentiment. China meets its annual growth target amidst extensive monetary and fiscal stimulus and there are interesting, new developments in DeFi for the Bitcoin ecosystem.

January 17, 2025

Crypto Markets Daily Jan 16 2025

With the recent lack of crypto-positive news, spot prices have been at the helms of macro drivers which haven't been great for risk-on sentiment either. However, risk-assets were buoyed on by the U.S. CPI print yesterday with Bitcoin trading close to the $100K mark once again. Skew levels for BTC and ETH have shifted their bearish tilt from OTM puts towards calls for short-tenors.

January 16, 2025

Crypto Markets Daily Jan 15 2025

Markets are eagerly awaiting the U.S. December CPI release. We believe should the figures exceed expectations, Bitcoin is likely to experience a short, but sharp move downwards. Following yesterday's spot price move up, ETH's term structure has inverted and Bitcoin's is flat.

January 15, 2025

Crypto Markets Daily Jan 14 2025

In the face of a second week of potentially scary macro data releases, and despite FUD caused by speculation of the U.S.’s selling of $6.5B worth of bitcoins, BTC spot bounced decisively from $90K levels to trade closer to $97K this morning. Derivatives markets remain supportive of the move: futures yields are positive and trending higher, with short tenors rallying harder to invert the term structure.

January 14, 2025

Paxos Gold – A Form of Digital Gold

Gold has a long history as a medium of exchange in the global financial system. However existing forms of trading gold all come with significant trade-offs. This report serves as a comprehensive deep dive into Paxos Gold – a tokenised stablecoin backed by gold reserves that offers investors an alternative avenue to own investment-grade physical gold with all the benefits of the blockchain.

January 13, 2025

Crypto Markets Daily Jan 13 2025

A bearish crypto market sees a flight to (relative) safety, as Bitcoin dominance remains solid despite its historical post-halving performance. A tough week of macro data last week could be followed by another this week, with markets expecting an uptick in CPI. Crypto options markets signal bearish sentiment in the short term, with skew favoring puts on BTC and ETH. Regulatory developments add to the uncertainty, with Bybit restricting services in India, Polymarket banned in Singapore, and Mango Markets shutting down operations following an SEC settlement.

January 13, 2025

Crypto Markets Daily Jan 10 2025

Crypto-assets are showing a slight recovery today, ahead of this afternoon’s much anticipated U.S. Nonfarm Payroll Report. Should that report show a blowout number of jobs added in December beyond the 160,000 expectation, the JOLTS Report earlier this week sheds some insight into how risk-assets may react. Derivatives markets are showing mixed messages as they try to price in the varying outcomes. AI tokens and AI agents are also outperforming the market significantly.

January 10, 2025

Crypto Markets Daily Jan 09 2025

With BTC, ETH, and most of the majors all moving downwards today, derivatives markets are showing a cautionary tale too. Both BTC and ETH's volatility smiles are skewed strongly towards puts for short-tenor options. However, it's not just spot prices that are moving down slowly, as the Fed's sticky inflation adversary dominated much of the Meeting Minutes. In China, the opposite battle is unwinding, unravelling an interesting relationship between U.S. and China's interest-rate differentials and their relationship to BTC.

January 9, 2025

Crypto Markets Daily Jan 07 2025

The institutional flow of capital was itching to get Bitcoin above $100K with two consecutive trading days of Spot ETF inflow levels last seen in November. However, derivatives markets weren't quite in the mood to join the party when BTC did eventually push past that level – BTC has entered a new regime where $100K is no longer a catalytical event for volatility or further rallies. Perhaps rightly so, as today's JOLTS report has sent risk assets back down again.

January 7, 2025

Crypto Markets Daily Jan 06 2025

Despite BTC’s spot price moving firmly back into bullish territory at the turn of the year, the positive momentum of sentiment in derivatives markets did briefly falter. The slowing down in sentiment momentum however is more true for ETH than it is for BTC and ETH's funding rates and futures-implied yields show this despite remaining net-bullish. It is a big week for macro as NFP figures for December is expected to show a strong labour market and MicroStrategy has a new party trick to help fundraise further Bitcoin purchases.

January 6, 2025

Crypto Markets Daily Jan 03 2025

BTC and ETH have stabilised after brief rallies, with BTC rangebound and ETH holding near $3,500, while ADA has surged 10% to $1.06, decoupling from the broader market. Implied volatility has dipped across shorter tenors but remains elevated longer-term, with ETH showing a sharper decline in demand for upside exposure. Market sentiment remains cautious, influenced by ETH Spot ETF outflows and separately, selling pressure from SUI's token unlock.

January 3, 2025

Crypto Markets Daily Jan 02 2025

The year starts green with a New Years rally across crypto markets – amongst the top 10 by market-cap, all majors are up, with XRP being a stand-out performer. Derivatives metrics are portraying the sentiment too – with perp funding rates for BTC and ETH up, as well as short-tenor futures yields. Options markets are equally showing a similar willingness for long exposure.

January 2, 2025

Crypto Markets Daily Dec 31 2024

Crypto markets move sideways yet Bitcoin has found footing at the $94K mark, and ETH is ranging around $3.4K. Despite MicroStrategy's acquisition of 2,138 BTC for $209M, significant outflows in Spot BTC ETFs ($377.6M) have maintained downward pressure, contributing to a cautious sentiment reflected in BTC skew. Short-term volatility smiles lean towards downside protection, but longer tenors signal optimism, with expectations for price increases after the New Year.

December 31, 2024

Crypto Markets Daily Dec 30 2024

BTC drops again to $93.8k and ETH remain range-bound between $3.3–$3.5k, as broader crypto markets continue their bearish trend. Implied volatility levels have dipped across tenors, reflecting low activity, while skew indicates cautious optimism for BTC and broader outperformance by ETH. Macro concerns persist as the U.S. debt ceiling debate looms, adding to the risk averse macro backdrop.

December 30, 2024

Crypto Markets Daily Dec 27 2024

The illiquid Christmas period continues as the S&P 500, Nasdaq, and Dow Jones barely moved yesterday. U.S. Treasury yields on the longer-end of the yield curve did ease slightly however, with 10Y tenors dropping in yesterday's session. After 4 consecutive trading days of strong outflows, the Spot BTC ETFs finally recorded net inflows of $475.2M. Derivatives metrics largely reflect the same sentiment as they did yesterday with BTC and ETH's at-the-money volatility term structure largely unchanged. Both majors' volatility smiles indicate continued cautiousness in the short-term with long-run expectations for a continuation of the bull-run.

December 27, 2024

Crypto Markets Daily Dec 26 2024

Yesterday BTC ranged at the $98K level before briefly touching $99.9K – we didn’t get everything that we asked for on our Christmas list as it now changes hands closer to $95K. Most of the market is back to a sea of red – within the top 10, only two coins are green on the day. But while traditional markets are quieter over the break, we would not discount crypto signalling any larger macroeconomic event in this period. Without any obvious macroeconomic data releases expected until the new year, it’s unexpected macro news that we are on the lookout for as likely drivers of volatility.

December 26, 2024

Crypto Markets Daily Dec 25 2024

It’s a quieter day in Trad-Fi as the market closes for Christmas day, but U.S. treasuries continue to feel the pressure with the 2s10s yield curve steepening further. Whilst Trad-Fi markets rest, crypto has had a relatively quieter day too, though we do see some signs of life as BTC looks ready to at least try close the year above the $100K mark. December’s end-of-year options expiration is poised to be one of the biggest yet though we believe that it is unlikely to create much volatility beyond Friday.

December 25, 2024

Crypto Markets Daily Dec 24 2024

Altcoin holders are feeling a slight weight fall off their shoulders as ETH trades up 2% on the day, and SOL is up nearly 5%. Amongst the top 10 cryptocurrencies by market-cap (excluding stablecoins) only BTC is down. ETH’s term structure is also no longer inverted, with implied vol levels compressed close together at all tenors. MicroStrategy remains unphased, purchasing another 5,262 bitcoins last week. BTC and ETH Spot ETFs diverge.

December 24, 2024

Crypto Markets Daily Dec 23 2024

The crypto market is still largely red, with Friday's end of year options expiry contract painting a different image of sentiment for BTC and ETH. It is not just crypto which has reacted to Chair Powell's role of the 'Grinch' however. The long-end of the US Treasury yield curve has sold off with 10Y yields rallying from 4.39% to 4.54%, their highest level in over six months.

December 23, 2024

Crypto Markets Daily Dec 20 2024

Crypto markets are in turmoil with Bitcoin plunging -7.7% in 24 hours, flipping market odds for December price targets on their head. Despite the short-term chaos, long-term bullish sentiment persists - could this be the dip before a rally?

December 20, 2024

Crypto Markets Daily Dec 19 2024

The Fed’s 25bps rate came with an unsettling hawkish tone from Chair Powell, jolting markets and unveiling the prospect of fewer 2025 cuts. Traders re-evaluate their risk-on strategies as both equities and crypto see red.

December 19, 2024

Crypto Markets Daily Dec 18 2024

Markets brace for pivotal central bank decisions this week. We analyse the latest shifts in sentiment across crypto with a focus on bitcoin’s volatility smiles, funding rates, and spot price trends. Read now to explore the cautious tone gripping traders, muted OTM call activity, and key data points shaping market sentiment.

December 18, 2024

Crypto Markets Daily Dec 17 2024

As BTC pushed its all-time high even further last night to $107,822, we explore the daily change in at-the-money implied volatility and implied volatility skews across BTC and ETH. Alongside, we share key announcements on 2 new stable coins: the RLUSD launch and the USDtb and outline upcoming macro data releases which set the economic background for crypto markets.

December 17, 2024

Crypto Markets Daily Dec 16 2024

With BTC reaching a new all-time high (ATH) of $106,443, we explore the daily change of at-the-money implied volatility and implied volatility skews across BTC and ETH. Alongside, we highlight the impact of this rally on specific altcoins and outline the macro drivers expected to impact crypto- specifically the Fed cuts later this week.

December 16, 2024

The Digitisation of Traditional Finance

In recent years, financial institutions have shown increasing interest in blockchain technology and the digitisation of financial products. A prominent application of blockchain is the tokenization of Real-World Assets (RWAs), where digital tokens are created to represent physical assets, such as fixed-income products. These tokenized fixed-income products, like bonds, aim to leverage blockchain technology to provide steady yields with relatively low risk. Blockchain promises several benefits for fixed-income products, including enhanced transparency, reduced transaction costs, and faster settlement times. However, questions remain as to whether these tokenized instruments truly deliver on these promises.

December 16, 2024

Crypto Markets Daily Dec 13 2024

Macroeconomic data from jobs to inflation is sending mixed signals for the U.S. economy, making the last stretch against inflation increasingly difficult. This uneasiness is reflected in derivatives — at-the-money options’ implied volatility levels are showing a decline at the front end of the term structure for BTC and ETH. The State of Texas provides some positive news for crypto.

December 13, 2024

Crypto Markets Daily Dec 12 2024

With the Fed receiving the greenlight for another rate cut in December after an as expected CPI print, crypto-assets have begun a broad based recovery rally. At short and long tenors, traders are signalling a continuous preference for upside exposure in BTC. Spot ETH ETF flows seem at odds with price action and the ECB finds itself in a challenging situation.

December 12, 2024

Crypto Markets Daily Dec 11 2024

November's CPI data met expectations, with core CPI steady at 3.3% for the fourth consecutive month and headline YoY CPI rising slightly to 2.7% from 2.6% in October. Bitcoin's market dominance has been recovering post-election, currently hovering around 57%. Microsoft shareholders rejected a proposal to allocate 1% of the company's $78 billion cash reserves to Bitcoin, aligning with the board's recommendation.

December 11, 2024

Crypto Markets Daily Dec 10 2024

MicroStrategy's Bitcoin fundraising techniques continue as they now own over 2% of the total BTC supply. Tech-giant Microsoft may follow in a similar fashion pending a shareholder vote. Spot ETF inflows continue and BTC regains some of its leaked market cap dominance over the past couple weeks. The wider macro picture as we approach the year end is one of uncertainty, both in monetary policy and geopolitical trade policy, as major central banks across the globe convene for the final time of the year over the next two weeks.

December 10, 2024

Crypto Markets Daily Dec 9 2024

BTC and ETH showed stable, sideways movement over the weekend but declined on Monday morning, with BTC trading around $98K and ETH at $3,870. BTC’s at-the-money implied volatility term structure, previously steepened during sideways price action, has flattened due to a rise in front-end volatility. ETH’s term structure has inverted, an unusual occurrence during a spot price slide, as such inversions have recently happened mostly during bullish rallies, making this situation notably different.

December 9, 2024

Crypto Markets Daily Dec 6 2024

Crypto’s capability for volatility has been proven to all new market participants over the last two days. After steaming through $100K then experiencing a flash crash to $93K, BTC perp funding rates briefly turned negative for the first time since August. A steep drop in BTC perp open interest also suggested some leveraged positions did indeed get flushed out, though the fall in OI was not incredibly deep compared to previous moves. Vol smile skew indicates traders expressing demand for downside protection, but not yet willing to give up upside positions. ETH shows a different picture with skew leaned towards calls and all-time high Spot ETF inflows. NFP all but confirms a Dec rate cut.

December 6, 2024

Crypto Markets Daily Dec 5 2024

In the middle of a bull run, two quiet days of macro is rare. After a relatively quieter day for macro yesterday, a storm of events including Chair Powell's likening of Bitcoin to digital gold helped push BTC straight through the wall it has repeatedly tried and failed to breach since the election: the $100K mark. Implied vol skyrocketed at the front end of the term structure and perp funding rates jumped to extreme highs reaching 0.11% from just 0.015% indicating a strong willingness by traders to maintain their leveraged long exposure to BTC. Finally, despite crossing $100K, BTC’s post-halving performance is still the worst of any cycle so far — though any further action above current levels in the short term would likely push the current cycle above 2016’s.

December 5, 2024

Crypto Markets Daily Dec 4 2024

Yesterday’s stronger-than-expected JOLTS report and trio of Fed speakers (who mainly used FOMC’s boilerplate language on monetary policy) proved not to be enough to move macro markets. Hitting the brakes may well turn out to be an option for the Fed but altcoins are showing no signs of slowing down. BTC's term structure has steepened significantly amidst rangebound price whilst ETH derivatives metrics suggest market players are seeking continued upward exposure.

December 4, 2024

Crypto Markets Daily Dec 3 2024

We said it would be a big week for macro and, two days in, things are certainly playing out that way. French 10Y OATs are around 2012 eurozone crisis levels. Fed speeches have pushed implied-odds for a December rate cut higher. Altcoins continue to rally, as total stablecoin supply reaches new highs. In derivatives, BTC skew is leaning towards short-tenor puts, whilst ETH skew indicates traders having a continued appetite for upside exposure to calls.

December 3, 2024

Crypto Markets Daily Dec 2 2024

This week attention turns to the Fed ahead of their Dec 18, 2024 meeting. JOLTS on Tuesday, NFP on Friday, and a slew of Fed speakers are expected to shed light on the health of the U.S. labour market after last-months non-report. Ripple is the latest altcoin to enjoy a rally above and beyond majors, overtaking stablecoins and Solana to become the third largest cryptocurrency by market cap. However, Bitcoin dominance remains above 55%.

December 2, 2024

DeFi Analytics - Nov 30, 2024

Blob gas usage is still incredibly strong as Layer 2 activity remains high. The spot price volatility may also have seen some stakers unlock their tokens and take profits, as we observe a drop in the amount of ETH staked on the Beacon Chain.

November 30, 2024

Crypto Markets Daily Nov 29 2024

Crypto markets quieter over thanksgiving, but still express their bullish positioning in derivatives markets as BTC takes another run at its next price target. ETH outperformance is on hold, delaying any hopes of an altcoin until at least tomorrow. The Fed's December meeting will be informed by NFP numbers next week, after last month's numbers were confounded by strikes and hurricanes.

November 29, 2024

Mysticeti – The Consensus Mechanism of Sui

Sui is a Layer-1 blockchain with smart contract capabilities, similar to other well known blockchains such as Ethereum and Solana. Sui blocks are created by a set of Delegated Proof-of-Stake authorities known as validators, which perform checks on transactions in the network, incorporate them into blocks and propose their blocks to all other validators. Sui’s consensus protocol, Mysticeti, then puts transactions into an order before executing and finalising them. This is how Mysticeti's consensus mechanism works.

November 28, 2024

Crypto Markets Daily Nov 28 2024

The Fed's December meeting is facing the same market scrutiny as September's as the probability of a pause in interest rate cuts is mulled against stubbornly persistent PCE inflation. BTC validated stubbornly bullish positioning in futures and perps markets that we highlighted yesterday as it re-rallied back to $98.5K before pulling back. ETH has underperformed on the day, but fundamentals remain strong in the midst of excess bullish positioning.

November 28, 2024

Crypto Markets Daily Nov 27 2024

The post-election “up-only” rally in crypto seemingly hit a roadblock this morning – although we note that the real bearish positioning in options markets was limited to short tenor options, and even then the skew looked bearish because of (we speculate protective) put-buying, rather than unwinding of bullish call positioning. Ethereum continues its outperformance in derivatives markets, with yields now more bullish than BTC. This could result in further inflows to the ETH ETFs, continuing a 3-trading day trend in inflows that contrast with BTC's outflows. MicroStrategy's latest Bitcoin acquisition will be funded by $3B in convertible notes, which we break down in today's note.

November 27, 2024

Crypto Markets Daily Nov 26 2024

Bitcoin trades 5% lower on the day, pausing its relentless charge towards the key $100K figure at least for now. So too have altcoins paused their outperformance of BTC, retaining their correlation on the way down after outperforming BTC on the way up over the last week. Derivatives markets have reacted at short tenors only as of yet, with increased put buying causing a strong bearish skew rather than a fall in the implied volatility of short-tenor calls. Donald Trump revives fears of stronger tariffs after his pick for Treausry secretary dialled them back yesterday, and attention turns to the Fed as November's meeting minutes are released ahead of a toss-up decision in December's meeting.

November 26, 2024

Crypto Markets Daily Nov 25 2024

Bitcoin dominance is on watch as Ethereum sustains its sharp outperformance following Gensler's exit announcement last week. Derivatives markets shift attention to ETH bullishness, strongly inverting its term structure while BTC's remains "just" flat, seemingly the first time since the election that ETH has enjoyed a significantly more dislocated term structure than BTC. However, it is 2020 / 2021 favourites that have recorded the best returns over the last week. Trump's latest administration pick is taken well by markets, leading some to revise their expectation for the more extreme impacts of tariffs.

November 25, 2024

Crypto Markets Daily Nov 22 2024

President-elect Trump's promise to rid crypto of the spectre of Gary Gensler appears to come true, as the current SEC chair announces his departure from the role on inauguration day. ETH legged up on the day, along with several other previous SEC targets, and derivatives markets price in a bullish skew towards OTM calls at both short and long tenors. However, the move does not move the cross-pair back beyond election-day levels and ETH Spot ETFs record a 6th consecutive trading day of outflows regardless -- in contrast to BTC's $1B inflows on Thursday.

November 22, 2024

Crypto Markets Daily Nov 21 2024

Bitcoin tries for $100K. Longer-dated volatility has finally followed the front-end of the term structure higher after two weeks of inversion -- as we highlighted in yesterday's comment. Short-dated ETH skews remain pinned while longer-dated stuff expresses increasing bullish sentiment, despite a pickup in onchain activity. Trump mulls a "crypto-czar" role for his incoming administration.

November 21, 2024

Crypto Markets Daily Nov 20 2024

The term structure of volatility has re-inverted once again – and again in tandem with a rally higher in spot, continuing the spot-volatility correlation that we’ve been repeatedly highlighting in previous daily comments. This time, however, the longer-dated stuff has started to rally too. See that in the chart below, where the 180d tenor (with June the closest listed expiry) meaningfully followed shorter-dated vols higher for the first time.

November 20, 2024

Crypto Markets Daily Nov 19 2024

Derivatives markets retain the bullish trend of the past weeks. Spot yields are almost reaching the positive highs of the past week, skew levels and funding rates remain strongly positive. The term structure of implied volatility is still inverted – but not as extremely as during the pre-election frenzy. The level of inversion has followed spot upward frequently since the election. The BTC Spot ETFs recorded inflows of $254.8 million yesterday, as the SEC approved the listing of options settling to BTC Spot ETFs – first BlackRock’s IBIT on the Nasdaq exchange, and then others on the NYSE and CBOE respectively. This isn’t the first US offering of crypto options – CME currently offer options on BTC and ETH that settle to the futures on their same market. However, we expect that it will open the floodgates to a growing interest in structured products, and for those structured products to have an impact on the supply and demand of volatility in existing crypto options markets.

November 19, 2024

Crypto Markets Daily Nov 18 2024

Derivatives markets reflect the start-of-week bullishness. Sentiment indicators have been growing more bullish alongside the growth in short-tenor vols. Market participants are seeking exposure to upward price movements through call options and futures yields have been on the rise just as perp funding rates are strongly positive, indicating leverage buildup for both tokens.

November 18, 2024

Crypto Markets Daily Nov 15 2024

ETH gave up almost all of its post-election gains against BTC even before the turn in the market, returning to trend since Nov 9. ETH has temporarily bucked its trend of underperformance against BTC several times in 2024, spiking higher following news of both BTC’s and ETH’s spot ETF launches. So far each catalyst has been just that – temporary. BTC pulled back 1.5% following Chair Powell’s speech, in line with the pullback of 0.6% in the S&P 500 – the two risk-on assets have increased their correlation since the election. Now that the election event risk is over we are watching the pace of rate cuts and health of the U.S. economy again as a potential driver of price action in what remains of 2024.

November 15, 2024

Crypto Markets Daily Nov 14 2024

Derivatives market activity has remained bullish during the bull run that propelled Bitcoin prices above $90,000, and has remained stubbornly bullish too through each pause in the rally. Future implied yields remain at extended levels despite the pull back in spot to $85K and the volatility term structure is still inverted (strangely, without an explosion higher in longer-dated vols). BTC volatility smiles have skewed towards upside exposure across the term structure after, the brief pause in the rally saw the 14-day and 30-day tenors briefly lose their upside tilt.

November 14, 2024

Crypto Markets Daily Nov 12 2024

Four of the five worst performing large-cap tokens over the last 7 days are stablecoins: USDC, USDT, and Dai, First Digital USD. They haven’t depegged, they just haven’t rallied like everything else. AI and compute-related tokens populate much of the list of top performers – the category, like DeFi and other developer-reliant categories, stands to benefit from the incoming administration’s promised regulatory push. BTC Spot ETFs saw another inflows of $1.1B on Monday. All U.S. Spot ETFs have recorded net inflows of $8.3B since Oct 10, totalling 31% of their total inflows of $26.97B since launch.

November 12, 2024

Crypto Markets Daily Nov 11 2024

BTC hit new all-time highs again over the weekend, currently trading near its high at $82.2K. ETH continued to enjoy a new period of outperformance. This post-election rally has kept positioning in derivatives markets at extreme levels for both majors – funding rates are strongly positive, futures prices range further above spot, and the term structure of implied volatility has reinverted after collapsing at the front end following the election.

November 11, 2024

Crypto Markets Daily Nov 8 2024

In last night’s FOMC meeting, the Federal Reserve lowered the target range for the Fed Funds Rate by 25 bps, to 4.5-4.75% in a unanimous decision. Fed Chair Jerome Powell said it is “remarkable how well the U.S. economy has been performing”, citing it as “better than any global peers”.

November 8, 2024

Daily Comment Nov 6 2024

Donald Trump has been elected as the 47th President of the United States, currently holding 277 Electoral College Votes and battleground states including Georgia, North Carolina, Pennsylvania, and Wisconsin. BTC rallied to a new life-time high as the result became clear, reaching a peak of $75,368. Implied volatility dropped drastically for short tenors, flattening BTC’s term structure while short tenor vol has gone further to exhibit a steep term structure.

November 6, 2024

How Volatile is this Election?

Ahead of the U.S. presidential election, we observe a notable increase in leveraged positioning across futures and perpetual markets, alongside inverted options term structures. Funding rates remain positive, and front-end implied yields have lifted, reflecting traders’ growing election-driven sentiment. Short-dated options demand has surged, particularly for Nov 8 expiries, driving implied volatility up. These developments mirror pre-event trends seen before the January ETF launch, though volatility levels are lower this time around.

October 31, 2024

Bitcoin's Macro Correlations

Bitcoin has long been touted as digital gold. However, despite both rallying to all-time highs in 2024, the correlation of BTC returns has been closer to US equities than gold. Now, following the first in the Fed's cycle of interest rate cuts, we re-examine the macro drivers of BTC spot returns and suggest a reason for BTC and gold's underperforming correlation that may have been resolved over the summer of 2024.

October 22, 2024

Carry Trade Collapse

Crypto as a 24/7 market was the first to react to the macro sentiment and this same drop was shortly replicated across the global markets as they opened. We expect this correlation to continue into September, with a chance of significant volatility into the run up to the next Fed meeting. The extent to the Fed's dovish shift against Bank of Japan’s hawkish stance will be key factors in shaping how the macro sentiment evolves over the coming months.

August 27, 2024

US Election 2024: Onchain Insight

Former President and Republican candidate Donald Trump has positioned himself as the pro-crypto candidate, leading Bitcoin to enjoy bullish price action as part of the "Trump Trade". The relationship between crypto and politics has become clear via Polymarket, an emerging decentralised prediction market on the Polygon blockchain that allows for 24/7 trading of a wide range of sporting and political events. As a result, Polymarket has become a go-to tool to monitor election odds and has frequently revealed a different perspective on the campaign.

August 20, 2024

Crypto Volatility: A Volatile Summer

A dramatic series of macro events have shaped the dynamics of spot and volatility so far this summer, causing tumultuous spot drops followed by sudden rebounds. Volatility has hence seen incredible peaks and fluctuations over the course of the past month, as well as market sentiment, with oscillating preference between BTC and ETH. The market also shows signs of cautiousness, with strong preference for OTM puts for shorter tenors but overall being bullish for the long term.

August 15, 2024

Crypto Volatility: A Tale of Two ETFs

The sudden and unexpected approval of a spot ETH ETF in the US resulted in a drastically different response from volatility markets when compared to the length and heavily anticipated approval process of BTC's ETF in early January. Given the different flavour of uncertainty that comes with an approval but no start date, we see a significant premium assigned to ETH volatility at all tenors over BTC. In addition, ETH's OTM calls trade at a significant premium to its OTM calls across the term structure in stark contrast to the bearish positioning indicated by BTC's vol smiles, indicating bullish positioning ahead of a potential July trading date.

Is the US Economy Hitting a Soft Patch?

While the first quarter saw inflation refuse to continue the fall that it posted in the first half of last year, last week's CPI read of 3.4% marked the first fall in the pace of inflation of the year and took the wind out of the argument that a reacceleration in inflation may even see the Fed consider further hikes. With markets still pricing out many of the cuts that they foresaw at the turn of the year, we remain attentive to several metrics that may show the first signs of softening in the economy, evaluate the state of swaptions volatility markets, and consider the likely implications of the 3 week wait for June's NFP release on risky assets, and on Bitcoin volatility markets in particular.

Bitcoin Halving 2024 Part 1: Block Reward, Transaction Fees, and Difficulty

The Bitcoin halving is a core feature of Bitcoin. Roughly every four years, the reward miners earn is halved in order to reduce the new supply of bitcoin to the market, ultimately resulting in a fixed, finite supply of 21,000,000. We cover the event's significant impact on the profitability of mining, and analyse how it has changed over the three halvings that the network has successfully processed. In the sequel, we will discuss the other side of the miner profitability coin – costs – and develop a mining cost metric that will allow us to compare the cost to mine a bitcoin with its market price.

Equities Don't Need Cuts to Rally

Equities rallied in March 2023 as the US Banking Crisis indicated that the Fed's hiking cycle may be reaching its end. When they delivered several more hikes, equities reversed their gains. However, when the Autumn brought a second round of interest rate cut bets, equities rallied once more. This time, the market pricing those cuts out did not cause equities to retrace. Instead, we have seen a strong rally into the first quarter of 2024 that has not lead to an increase in implied volatility or protective put-buying skews of the volatility surface. What is driving the rally now, and how long can it be sustained?

Ethereum's Dencun Upgrade: Part Two

Ethereum’s Dencun upgrade is intended to make storing Layer 2 blockchain data on Ethereum’s mainnet cheaper. This will be achieved by making changes (detailed in part one of this report) to the way that L2s pay for gas by creating an independent gas market for data storage. This decision has implications on the amount of gas used by non-L2 applications or users on the regular gas market, the amount of ETH that will be burned in each block (via the base fee) and the rate earned by Ethereum stakers.

Ethereum's Dencun Upgrade: Part One

On the 13th of March, Ethereum nodes are expected to implement an update to the network: EIP-4844, also known as “proto-danksharding”. This update introduces a new transaction type that is intended to reduce the cost of posting L2 rollup data to the Ethereum mainnet by including a dedicated storage space. We discuss the high transaction fees that motivate the upgrade, how EIP-4844 is intended to address this issue, and the implications proto-danksharding may have on the base fee, the amount of ETH burnt, and staking rates.

Crypto Volatility in Review: September 2023

September saw the continuation of two trends: first, we continue to see OTM optionality priced near to its highest levels relative to the ATM level of implied volatility as the volatility smiles of both assets remain near to their historically steepest levels. Second, ETH’s implied volatility is still below the levels priced by BTC’s derivatives markets having continued the trend that it began following The Merge in September last year. However, a similar trend in the ratio of their realised volatility appears to have settled, with the ratio trading sideways near to 1 since the middle of 2023.

February 19, 2024

Event Risk Volatility

Several event risks are appearing on the horizon that indicate significant uncertainty for crypto-asset prices, including a follow-up ETF application deadline, the halving of Bitcoin's block reward, and two chances for the first cut in interest rates after the sharpest hiking cycle in decades.

February 15, 2024

Volrelation

The correlation of changes in BTC spot price to those of US equity indices has fallen since February of this year to a near-zero statistical relationship. Whilst both have retraced significant losses sustained in 2022, BTC's has recorded its strong YTD performance of +86% independently of movements in the both the S&P 500 and the Nasdaq 100 indices. We also observe a fall in the correlation between changes in the implied volatility of BTC and ETH as measured by our own implied volatility index, the BSIV. This index shows little correlation between the volatility implied by options on BTC and the S&P 500, despite a strong historical relationship between their spot prices

February 8, 2024

Crypto 2024: The Year of Volatility

The year ahead will be the year of volatility. While the latest economic data do show signs that inflation is moderating, employment remains strong, and growth is resilient, market pricing is certainly tilted towards the probability of a successful soft-landing. The building expectations mean that any deviation from the best-case scenario path could see considerable corrections in the year to come, with heightened sensitivity in risk-on assets to macroeconomic data releases.

February 8, 2024

Will Ethereum Continue to Under-Perform Bitcoin?

In September 2022, Ethereum eschewed its Proof of Work roots and switched to a Proof of Stake consensus mechanism. At the same time, it began a period of significant under-performance against BTC. Contrary to the consensus view that several tailwinds will see Ethereum outperform Bitcoin in the coming year, our analysis suggests that its inability to succeed against Bitcoin with existing pressures on supply indicates a structural re-pricing of the asset following the Merge.

January 29, 2024

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