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.
Key Insights
Futures: Futures open interest surged during election night, as traders swiftly re-entered leveraged positions to take exposure to the rally in spot price.
Perpetuals: Perpetuals open interest rose sharply overnight, continuing the sustained trading volumes activity observed over the weekend as traders seek exposure to further upside price action.
Options: Implied volatility levels have dropped for both BTC and ETH for short-dated options, with BTC’s term structure now flat and ETH’s evolving into a steep curve.
Block Scholes BTC Senti-Meter Index
Block Scholes ETH Senti-Meter Index
Block Scholes’ Senti-Meter index aggregates the funding rate, future-implied yield, and volatility smile skew into a single expression of sentiment in derivatives markets — see more in the methodology article here.
Macro, Tech & Regs
Macro Calendar & Recent Events
- U.S. PCE Inflation — Oct 31, 2024 — U.S. PCE Inflation rose by 2.1% year-over-year in September, and 0.2% month-over-month.
- U.S. Nonfarm Payroll Report — Nov 1, 2024 — The U.S. economy added a mere 12,000 jobs in October, below expectations of 110,000 jobs. This didn’t move markets significantly, as the Bureau of Labor Statistics (BLS) cited hurricanes and labor strikes for the low value.
- FOMC Meeting — Nov, 7, 2024 — The Federal Reserve is widely expected to cut the target range of the federal funds rate by another 25 bps as it continues its path of policy normalization.
- BoE Meeting — Nov, 7, 2024 — The Bank of England (BoE) is also expected to cut its base rate by 25 bps amidst cooling headline inflation, although services prices still remain sticky.
- China Standing Committee Meeting — Nov 4–8, 2024 — The highest legislative body in China is meeting this week to discuss the details of a fiscal stimulus package as large as 10 trillion yuan.
The BTC Trump Trade — BTC Spot Price rallied into price discovery, reaching a peak of $75,368 overnight amid expectations for a Republican victory.
Trending News
- Trump has won the U.S. presidential election and is set to begin his term in January 2025, with pro-crypto vice president JD Vance expected to join him in office.
- BTC Spot ETF Outflows were $116.8M on November 5, 2024, which was disappointing following their strong recent momentum. Blackrock’s IBIT Trust ETF Fund saw its first outflows since October 10, 2024.
Futures Open Interest Surges Again
Futures open interest experienced a sharp decline last week, as traders closed out leveraged positions ahead of the election during the pre-election spot price volatility. However, after a period of muted movement in the hours before the results became clear, OI levels quickly surged again, marking a rapid re-entry of leveraged positions and suggesting a renewed appetite for risk. BTC continues to dominate positioning in futures, as it does in all derivatives markets, suggesting that any possible rotation of capital into ETH contracts has yet to materialize. In a departure from the trend of lower activity, trading volumes remained high even over the weekend.
Bybit Futures Swap Open Interest
Bybit Futures Trading Volumes
Perp Open Interest Recovers Highs
Perpetual swap open interest mirrored trends in futures over the week leading into the election, and throughout the night of it. Initially, positions declined gradually during pre-election spot volatility, but then surged sharply as the election outcome became more certain. This timing suggests a renewed appetite for directional bets, with traders re-entering positions to participate in the election result upside. Notably, weekly trading volumes for perpetuals held steady and, like futures, remained unusually high over the weekend. This sustained volume and open interest increase indicate that market participants are positioning actively, driven by the growing clarity around the election results.
Bybit Perp BTC & ETH Open Interest — Positions surged overnight as the election outcome became clearer and BTC’s spot price rallied to new all-time highs.
Bybit Perp Trading Volumes — Perpetuals trading volumes remain robust, even during weekends, signaling sustained market engagement ahead of the election.
Funding Rates Consistently Positive
Perpetual funding rates have held steady and positive, consistent with last week’s trend and signaling that traders are still willing to pay a premium for leveraged long exposure despite BTC’s spot price pausing soon after its new all-time high. We see the same across most altcoins, suggesting stable demand for long positions. However, similarly to last week, SOL, TON, ADA and ATOM have seen brief dips into negative funding, marking a short-lived pullback in sentiment. Funding has since returned to positive levels, indicating that any hesitation in bullish sentiment has quickly been overcome.
BTC Options
BTC’s volatility term structure recently flattened after a sustained inversion in the two weeks before the election, reflecting a resolution of the event risk as the market’s preferred candidate was elected and there was little sign of a disputed result. Now, short-tenor volatility levels have fallen to match the levels implied at longer tenors throughout the election. Despite steady and relatively subdued trading volumes, BTC options OI has surged significantly in recent hours, indicating heightened interest in positioning for potential post-election longer-term volatility.
BYBIT BTC OPTIONS VOLUMES
BYBIT BTC OPTIONS OPEN INTEREST
BTC Volatility Term Structure Flattens
BYBIT BTC & ETH Volatility Term Structure — The term structure has flattened after a significant inversion that saw extremely short-tenor volatility rise above 100%.
BYBIT BTC SVI ATM IMPLIED VOLATILITY — The flattening of the term structure took place within a matter of hours as the election outcome became clear.
BYBIT BTC IMPLIED AND REALIZED VOLATILITY — BTC’s realized volume has increased dramatically in recent hours, reflecting the spot rally.
ETH Options
Similarly to BTC, the inversion in ETH’s implied volatility term structure has resolved. However, ETH’s short-tenor volatility levels have underperformed, falling below the levels at the back end of the term structure. As a result, the term structure now displays a steep shape in contrast to BTC’s, indicating a lower expectation of volatility in the short term. To reflect this, trading volumes have remained subdued. However, open interest has climbed, indicating that despite low trading volumes, there hasn’t been a significant closure of options positioning just yet.
BYBIT ETH OPTIONS VOLUMES
BYBIT ETH OPTIONS OPEN INTEREST
ETH Volatility Term Structure Steepens
BYBIT ETH VOLATILITY TERM STRUCTURE — The inversion has come to an end, and the term structure has now steepened overnight.
BYBIT ETH SVI ATM IMPLIED VOLATILITY — The decline in short-tenor implied volatility has been steeper for ETH than for BTC.
BYBIT ETH IMPLIED AND REALIZED VOLATILITY — ETH’s realized volatility has mirrored BTC’s in response to the spot rally triggered by the election outcome.
Volatility by Exchange
BTC, 1-Month Tenor, SVI Calibration
ETH, 1-Month Tenor, SVI Calibration
Bybit Volatility Surface
Listed Expiry Volatility Smiles
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