KEY TAKEAWAYS
- Bybit and Block Scholes released a report analyzing a $10 billion market downturn in crypto derivatives.
- Bitcoin maintained positive funding rates despite a significant market sell-off triggered by tariff threats.
- Ethereum experienced increased volatility, with its realized volatility surging to nearly 140% during the price correction.
- The market panic led to a $3.1 billion reduction in perpetual swap open interest across major cryptocurrencies.
Bybit, the second-largest cryptocurrency exchange by trading volume, has released a new weekly crypto derivatives report in collaboration with Block Scholes. The report provides a detailed analysis of the recent $10 billion market downturn and examines the movements in options pricing.
The report highlights a significant sell-off that mirrored trends in the equities markets, resulting in a substantial reduction in open interest. Despite the turmoil, Bitcoin (BTC) maintained positive funding rates, distinguishing itself from other mainstream tokens. In contrast, Ethereum (ETH) experienced increased volatility, with options market data suggesting ongoing downward pressure.
Market Turmoil Triggered by Tariff Threats
The market sell-off was triggered by tariff threats from former U.S. President Donald Trump on Monday, February 3. This announcement led to a broad sell-off across both crypto and U.S. equities markets. The resulting market panic wiped out $3.1 billion in perpetual swap open interest across major cryptocurrencies, including BTC, ETH, XRP, and SOL.
Ben Zhou, co-founder and CEO of Bybit, estimated total liquidations to be between $8 billion and $10 billion, based on data from Bybit’s platform. The heightened market activity drove trading volumes to a monthly high of $31 billion in perpetual swaps on February 2, as traders sought to exit their positions.
Impact on Altcoins and Ethereum’s Volatility
The aftermath of the sell-off saw altcoins suffer significant losses, with perpetual swap funding rates declining sharply. This decline was largely attributed to traders liquidating long positions. However, BTC managed to maintain neutral funding rates, showcasing resilience amid the market chaos.
Ethereum, on the other hand, demonstrated less stability compared to BTC. Its spot prices fell below $2,500, although open interest levels remained relatively stable due to lower-than-expected volatility in the ETH options market. Despite this, ETH’s realized volatility surged to nearly 140% during the price correction, indicating that further risks may not yet be fully accounted for in the options market.
For a comprehensive analysis of volatility trends, funding rates, and options market dynamics, access the full report here.
Why This Matters: Impact, Industry Trends & Expert Insights
The recent report by Bybit and Block Scholes highlights a $10 billion crypto market washout, with Bitcoin maintaining neutral funding rates despite a broad sell-off triggered by tariff threats.
Recent industry reports indicate that the cryptocurrency derivatives market is experiencing significant growth driven by institutional demand. This aligns with the news event as Bitcoin’s resilience amidst the market turmoil reflects the strong institutional long bias and sustained bullish positioning.
A report highlights Bitcoin’s resilience during market downturns, with its status as a safe haven asset contributing to its stability. This supports the news event’s impact, as Bitcoin’s ability to maintain neutral funding rates underscores its potential to attract more institutional investors, even during periods of market volatility.
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