Key Insights

The broad selloff in risk-on assets has continued into this week, resulting in a deepening in bearish signals across crypto-asset derivatives markets. Funding rates report a demand for short exposure, futures prices trade below spot prices, and volatility smiles across the term structure have priced-in a strong skew towards OTM puts as traders look to hedge against further downside moves. The term structure of at-the-money volatility has inverted once more, after a disappointing clarity to Trump’s planned strategic digital asset reserve saw short-dated volatility briefly fall ahead of last weekend.

Perpetuals: Funding rates have been largely reactive to spot moves, with ETH’s persistently negative rate reflecting its under-performance in spot.

Options: Smiles at all expirations have skewed further towards OTM puts as short-dated protection against further downside is in strong demand.

Block Scholes BTC Senti-Meter Index

Block Scholes ETH Senti-Meter Index

‍Block Scholes’s Senti-Meter Index aggregates the funding rate, future-implied yield and volatility smile skew into a single expression of sentiment in derivatives markets. See more in the methodology article here.

Macro, Tech & Regs

Macro Calendar & Recent Events

• Japan Q4 2024 Growth — Mar 10, 2025 — Japan’s annualized Q4 growth was revised down to 2.2%, slower than the initial 2.8% reported.

• US JOLTS Report — Mar 11, 2025 — Job openings in January rose by 7.74M, above the expected 7.6M, with the layoff rate falling and quits rate rising. The data shows a resilient labour market in January, amidst a slew of recent data that has suggested a slowdown in the US economy.

• US CPI — Mar 12, 2025 — Both headline and core CPI in the US fell more than expected in February. Year-over-year headline inflation fell to 2.8% (exp 2.9%) and year-over-year core CPI fell to 3.1% (exp 3.2%), marking the first time both declined since July 2024.  

• Bank of Canada Monetary Policy Meeting — Mar 12, 2025 — The BoC is expected to cut its benchmark interest rates from 3.00% to 2.75% amidst Trump’s tariff threats.  

• University of Michigan (UoM) Consumer Sentiment — Mar 14, 2025 — The UoM Consumer Sentiment report is expected to show a drop in sentiment from 64.7 in February to 63.5 in March.

De-risking across the curve — The past three weeks have been characterized by widespread de-risking across equities and crypto. BTC has fallen more than 25% below its all-time high in January, with US equities, SPX and NDX, both down around 10% from their February highs.

Trending News

• Ethereum’s Pectra Upgrade achieved finality on the Holesky testnet after nearly two weeks, moving the network closer to the launch of the new upgrade designed to increase the scalability of the network and provide more flexible staking options. 
• Japan’s ruling Liberal Democratic Party (LDP) has introduced a plan to lower the tax rate on crypto gains from 55% to 20%.

Funding Rates Reactive to Spot Moves

Key Insights

Choppy spot price movements have been reflected in funding rates, with the direction of BTC and altcoins rates reacting largely to movements in spot rather than encoding longer-held market views. ETH’s spot price has sold off harder in downward market moves and struggled to enjoy the same magnitude of any wider relief rallies. As a result, ETH has recorded the worst YTD performance of any of the five tokens named in Trump’s stockpile of digital assets. This too has been reflected in funding rates, as ETH perpetual swaps highlight a strong demand for leveraged short exposure to further downside.

BTC Options

Key Insights

Despite persistently higher realized volatility pushing up both short- and long-tenor implied volatility levels, trade volumes in options remain low. Last Friday saw the expiration of a significant proportion of open interest, the majority of which was in downside protection against a deepening in the selloff. However, options markets have returned to an inversion of the term structure that dissipated during last Friday’s White House Crypto Summit, and now short-dated put contracts are in strong relative demand.

BYBIT BTC OPTIONS VOLUMES

BYBIT BTC OPTIONS OPEN INTEREST

Realized Volatility Persists Through the Selloff

BYBIT BTC ATM TERM STRUCTURE — The front end of BTC’s term structure is inverted, but less strongly than ETH’s.

BYBIT BTC SVI ATM IMPLIED VOLATILITY — The rally in short tenor volatility has finally dragged longer-run expectations higher, with the 60d tenor now trading at 52%.

BYBIT BTC IMPLIED AND REALIZED VOLATILITY — While mid-term volatility expectations have increased, realized volatility has hit its highest levels since the US election.

ETH Options

Key Insights

A significant premium in short-dated volatility that had built up ahead of last Friday’s White House Crypto Summit corrected swiftly following the release of a strategic reserve factsheet. However, incredibly high and persistent levels of realized volatility soon caused the inversion of the volatility term structure to return. ETH, like other crypto-assets, has followed the broader selloff in risk-on sentiment since mid-February. However, ETH has significantly underperformed even other altcoins in the selloff, and now trades below it’s pre-election level. Demand for puts has increased  across the term structure, with longer-dated volatility smiles all but losing their skew towards OTM calls and short-dated smiles skewing as much as 21 points in favour of downside protection.

BYBIT ETH OPTIONS VOLUMES

BYBIT ETH OPTIONS OPEN INTEREST

Volatility Expectations Continue to Climb Higher

BYBIT ETH VOLATILITY TERM STRUCTURE — After briefly falling to a flat shape, the term structure of volatility has inverted once more.

BYBIT ETH SVI ATM IMPLIED VOLATILITY — Short-tenor volatility levels are back at nearly 80% after a fall last Friday to just 62%.

BYBIT ETH IMPLIED AND REALIZED VOLATILITY — The increase in short-dated volatility is a result of the incredibly high and persistent level of realized volatility.

Volatility by Exchange

BTC, 1-MONTH TENOR, SVI CALIBRATION

ETH, 1-MONTH TENOR, SVI CALIBRATION

Bybit Volatility Surface

Constant Maturity Smile

Data & Methodology

Data Acquisition, Composition & Timeline

Open interest and trading volume data are sourced “as is” from the Bybit exchange platform API exclusively, and as such do not represent a comprehensive picture of the sum of trading activity across all derivatives markets or exchanges. The data visualized in this report consists of hourly and daily snapshots, recorded over the previous 30 days. Daily (hourly) snapshots of trade volume record the total sum of the notional value of trades recorded in the 24H (1 hour) period, beginning with the snapshot timestamp.

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If not explicitly labeled as derived from another exchange, the input instrument prices to all derivatives analytics metrics in this report are sourced from the appropriate endpoints of Bybit’s public exchange platform API. In the event that data is labeled or referred to as representing the market on another exchange source, that data is sourced from the appropriate endpoint of each respective exchange’s public API.

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Macroeconomic charts and data are sourced “as is” from the Bloomberg Terminal. Exchange data is sourced “as is” from publicly available exchange APIs. Block Scholes makes no claims about the veracity of public third-party data.

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Open Interest & Volume Dollar Denomination

After acquisition of underlying-denominated raw data for open interest and trading volume on the Bybit exchange platform from Bybit’s API endpoint, equivalent dollar-denominated figures are calculated using the concurrent value of Block Scholes’s Spot Index for the relevant underlying asset.

Block Scholes’s Spot Index represents the aggregate Spot mid-price for a given currency across the top five CEXs by volume (with USD-quoted markets). It considers the proportion of total volume in the instrument on the exchange, as well as the deviation of a data point from those on other exchanges.

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Block Scholes–Derived Analytics Metrics

Futures prices are used for Block Scholes’s futures-implied yields calculation services in order to derive the constant-tenor annualized yields displayed in the Futures section of this report.

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Options prices are used for Block Scholes’s implied volatility calculation services in order to calibrate volatility surfaces, from which all derivatives volatility analytics displayed in the BTC Options and ETH Options sections of this report are calculated. Volatility smiles are constructed by calibrating to mid-market prices observed in Bybit options markets. As part of the calibration process, prices go through rigorous filtration and cleaning steps, which ensures that the resulting volatility surface is arbitrage-free and has exceptional fit to the market observables.