Bybit reveals shocking findings in new derivatives report on ETH and BTC

On December 12, 2024, Bybit, located in Dubai, United Arab Emirates, released a new report detailing trends in derivatives markets in collaboration with Block Scholes. This report addressed the ongoing fluctuations in both Ethereum (ETH) and Bitcoin (BTC) positions within derivatives markets, particularly focusing on open interest and perpetual contracts. The report revealed that the ETH perpetual open interest had sharply declined due to the liquidation of overleveraged long positions while ETH maintained a lead over BTC in options open interest. Analysts in the report attributed this decline to lackluster spot price performances that investors faced recently. Although optimism remained among investors, caution was reflected through lower funding rates in perpetual swaps. The funding rates for ETH perpetuals reset to approximately 0.01%, showcasing a recalibration of the market sentiment after the unwinding of leveraged long positions. As ETH experienced a retreat, its perpetual open interest dropped significantly while the BTC perpetual activity remained stable, except for a notable brief spike that occurred as BTC surged above $100K. This stability in BTC's performance contrasts sharply with the situation in the ETH market, indicating diverging investor sentiments regarding the future performance of both cryptocurrencies. The report further analyzed the indicators spanning futures, perpetuals, and options markets, employing benchmarks from pre-U.S. election levels. Observations noted that despite recent declines in trading volumes for ETH, open interest in options markets remained bullish. The report highlights an inverted term structure for ETH options, contrasting with BTC's flat term structure. Such dynamics are seen as indicative of a market adjusting to revised expectations following recent price movements. In conclusion, while the withdrawal from overleveraged positions indicates a cautious approach among investors, the report underscores a more complex narrative within the cryptocurrency derivatives landscape. The findings suggest that even though funding rates stabilized around neutral ranges post-liquidation, the optimism in ETH's options market remains, hinting at underlying strength despite prevailing challenges. The ongoing assessment of these trends in relation to market behaviors is critical as it sets the stage for understanding future movements in the digital assets space.