KEY TAKEAWAYS
- Bybit’s latest report reveals Bitcoin’s breakout from a low-volatility range, with a rebound towards $68,000.
- Despite price recovery, derivatives markets remain cautious, with high demand for downside protection.
- Bitcoin and Ethereum ETFs show net outflows, indicating weak retail sentiment and declining leverage.
Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has released the latest Bybit x Block Scholes Crypto Derivatives Analytics report. The report provides an in-depth analysis of recent volatility, positioning, and sentiment across Bitcoin and Ethereum derivatives markets.
The report highlights that Bitcoin recently broke out of a prolonged low-volatility range after briefly falling to $62,000, followed by a sharp rebound toward the $68,000 level. Despite the recovery in spot prices, derivatives markets continue to signal caution.
Key Findings from the Report
Bitcoin’s realized volatility rose sharply after weeks of consolidation. During the sell-off, options markets aggressively priced downside risk but did not reprice higher on the rebound. One-week at-the-money implied volatility climbed to about 60%, leaving the front end of the volatility curve mildly inverted. Additionally, put skew eased from extreme levels but remains biased toward downside protection. Perpetual futures open interest has continued to decline, indicating limited appetite for leveraged exposure.
Han Tan, Chief Market Analyst at Bybit Learn, noted, “The $70,000 psychological level has thwarted Bitcoin bulls for much of this month, keeping the world’s oldest and largest cryptocurrency on course for its fifth consecutive monthly decline.” He added that while crypto’s fundamentals remain supportive, the current confidence crisis may eventually create space for a strong bullish narrative to emerge, particularly if macroeconomic clarity improves around Federal Reserve policy or U.S. trade policy.
Broader Market Indicators
The report also shows that despite the rebound in spot prices, derivatives markets remain defensively positioned. Short-dated options continue to reflect demand for protection against renewed downside, and volatility levels during the recovery remain notably lower than those seen at the height of the sell-off.
Broader indicators reinforce the cautious outlook. Spot Bitcoin ETFs have recorded net outflows for four consecutive months, placing Bitcoin on track for its fifth straight monthly decline, a pattern last observed during the bear market following the 2018 ICO cycle. Ethereum shows a similar setup, with spot Ether ETFs nearing a fourth month of net outflows since their launch in July 2024. Weak retail sentiment and declining leverage further underscore the lack of conviction behind the recent price recovery.
The full Bybit x Block Scholes report is available for download here.
Why This Matters: Impact, Industry Trends & Expert Insights
Bybit and Block Scholes have released a report highlighting diverging signals in Bitcoin derivatives markets, indicating a cautious stance despite recent price recoveries.
Recent industry reports indicate significant deleveraging and defensive positioning in the Bitcoin derivatives market. This aligns with the report’s findings of a cautious outlook, as evidenced by declining perpetual futures open interest and continued demand for downside protection in options.
As per insights from Deriv.com, there is cautious optimism in the derivatives markets, with traders accumulating call options amid a strong early-year rally. This supports the report’s indication of a defensive market stance despite the recent spot price recovery.
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