KEY TAKEAWAYS
- Bybit’s latest report highlights a broad selloff in the crypto market due to a rapid repricing of the Federal Reserve’s policy outlook.
- Bitcoin and Ether prices have significantly dropped, with Bitcoin falling over 30% from its October 2025 high.
- Short-term volatility has surged, but longer-term volatility remains muted, indicating cautious market positioning.
Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has released its latest Bybit x Block Scholes Crypto Derivatives Analytics report. The report analyzes recent market stress across digital assets as investors reassess expectations for United States monetary policy.
The report, announced here, reveals a broad selloff in the crypto market alongside global risk assets. This selloff has been driven by a rapid repricing of the Federal Reserve’s policy outlook and renewed strength in the US dollar. As a result, the total crypto market capitalization fell by approximately 4.7 percent within 24 hours, with significant losses among major tokens.
Short-Term Volatility Surges as Bitcoin and Ether Prices Drop
Bitcoin’s price fell to around $81,000, marking a decline of over 30 percent from its October 2025 high of $126,100. Ether also experienced a significant drop, falling below the $2,700 mark, well under the $3,000 psychological level. Year-to-date, Bitcoin and Ether have decreased by more than 5 percent and 8 percent, respectively.
This selloff has led to a sharp increase in short-term options implied volatility. One-week at-the-money implied volatility rose to about 46 percent for Bitcoin and approximately 58 percent for Ether. However, longer-dated volatility did not increase as significantly, indicating that traders are primarily concerned with elevated near-term uncertainty rather than a prolonged period of market stress.
Muted Derivatives Participation and Cautious Market Positioning
Despite the price declines, derivatives market participation remains subdued. Open interest in perpetual futures contracts has not decreased sharply alongside spot prices and remains below levels recorded before the October 2025 liquidation event. Daily trading volumes in perpetual contracts are also significantly lower than those observed during the first three quarters of 2025, reflecting continued caution among market participants.
Han Tan, Chief Market Analyst at Bybit Learn, commented on the situation, stating, “Cryptos have been caught up in the selloff across global assets, as markets aggressively reprice the Fed policy outlook under a presumably less-dovish Fed Chair.” Tan noted that traders are closely monitoring the $80,000 level for Bitcoin, as a sustained break below this psychological threshold could extend Bitcoin’s decline into the mid-$70,000 range.
The report also highlights that recent Federal Open Market Committee communications had little impact on longer-term volatility expectations. Despite a slightly hawkish tone and an emphasis on a wait-and-see approach, implied volatility across longer tenors for both Bitcoin and Ether has continued to trend lower since peaking in late 2025.
Overall, the analysis suggests that while short-term volatility has intensified, the lack of a sustained rise in longer-dated volatility and trading activity reflects a market environment characterized by restrained participation and cautious positioning.
Why This Matters: Impact, Industry Trends & Expert Insights
The Bybit and Block Scholes report highlights a surge in short-term crypto volatility as markets react to a repricing of the Federal Reserve’s policy outlook. This has led to a notable selloff in major cryptocurrencies like Bitcoin and Ether.
Recent industry reports indicate a cautious recovery in the crypto market following the volatility at the end of 2025, with Bitcoin trading around $93,000-$97,000. This aligns with the current market reaction to the Fed’s policy outlook, as highlighted in the report’s findings.
As per insights from Amberdata, Bitcoin’s realized volatility has returned to normal ranges, driven by macro factors like Federal Reserve policy decisions. This supports the report’s emphasis on the impact of Fed repricing on short-term crypto volatility.
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