Bybit and Block Scholes Team Up to Analyze Crypto Derivatives Market Dynamics

The report points to how despite major options expirations occurring on December 27, 2024, there remains low volatility in the market.

The world’s second-largest cryptocurrency exchange by trading volume, Bybit, recently launched its Crypto Derivatives Analytics Report in collaboration with Block Scholes. The report highlights how major options expirations are set to occur on December 27, 2024, yet the market is showing low volatility.

Despite the realized volatility of Bitcoin’s (BTC) and Ethereum’s (ETH) showing trends to the higher side, short-term options have shown little reaction to the price swings. This shows how options are not aligning with the market shifts happening in the spot.

There’s over $525 million set to expire in BTC and ETH options contracts in the next week. December will also see one of the biggest options expiries, going by the expiration date. However, expectations for volatility are still low.

The analysis finds interesting disparities in the structure of ETH, which isn’t mirrored by BTC. It can be noticed how the finance rates at times go negative as the spot price goes down, hinting at a new phase in the market.

Market Expectations and Volatility Shifts

While the realized volatility of BTC and ETH rose, short-term options haven’t reflected this. The structure of BTC’s volatility is less sensitive to spot price changes compared to ETH, whose short-term options are much more sensitive to such moves.

Over the past two weeks, the spot price for BTC ranged from $92K to $106K, and that for ETH from $3.3K to $4K, but the short-tenor options haven’t kept pace with such moves. Funding rates for perpetual contracts mirrored spot price movements, going from neutral to negative.

When it comes to options, ETH’s short-term options are generally much more volatile, whereas term structure is more focused on BTC for long-term volatility.

The last stretch of the year will see the expiration of nearly $360 million in Bitcoin options (both call and put), which could have a major impact on the volatility of Bitcoin, influencing how far and fast it may climb or fall.

While calls are still leading open interest at the moment, having more puts traded, this still implies that market participants are setting up for potential upside price moves. This again signals how BTC and ETH seem to have somewhat differing dynamics with their respective options markets being near year’s end.