Bybit's crypto derivatives report highlights year-end trends

Investing.com -- Bybit, the world's second-largest cryptocurrency exchange by trading volume, has partnered with Block Scholes to release its latest crypto derivatives analytics report. The report provides insights into market behavior and open interest trends during the significant year-end options expiration for Bitcoin (BTC) and Ethereum (ETH).

The report revealed that open interest in BTC and ETH perpetual swaps remained stable during the critical year-end options expiration, despite not returning to the highs seen in early December 2024. This steadiness indicates that traders did not heavily depend on perpetual contracts to hedge the delta of expiring options, contributing to the subdued volatility during this period.

Trading volumes fell during the winter holiday season, coinciding with a drop in realized volatility, which hit its lowest levels of December. Despite the expiration of December's options, there wasn't a surge in volatility as expected. Instead, realized volatility fell to the lower end of its recent range.

The implied volatility term structure for BTC options continues to be steep, with longer-dated implied volatility around 57% and 1-week at-the-money options trading about five points lower. Most of the expired open interest has not been reinvested, maintaining a neutral call-put balance.

As a result, BTC's options market shows limited leverage compared to its position at the beginning of December 2024, indicating a cautious sentiment.

Despite the substantial expiration of ETH options in late December 2024, the market dynamics remained stable. A spike in realized volatility in December did not carry over into the new year, with ETH's spot price currently exhibiting lower volatility compared to short-tenor implied volatility.

Over the past week, the implied volatility term structure for ETH options has changed, briefly steepening before flattening again, diverging from BTC's consistently steep profile. This pattern suggests that ETH's options market is preparing for potential short-term volatility in spot price movements.

Interestingly, call options for ETH have gained momentum at the start of 2025, dominating the market and indicating an optimistic outlook among traders.

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Source: Investing.com