Bybit Block Scholes Report Signals Calm Before Expiry

• BTC and ETH options expirations may cause volatility.
• Short-term options lag behind actual volatility movements.

Bybit, the world’s second-largest cryptocurrency exchange by trading volume, recently launched its Crypto Derivatives Analytics Report in collaboration with Block Scholes.  The report points to how despite major options expirations occurring on December 27, 2024, there remains low volatility in the market. Although Bitcoin’s BTC and Ethereum’s ETH volatility in actuality is trending higher, short-term options have shown little reaction to said

swings in price. So it shows that options cannot quite align with those market shifts happening in the spot.

There’s over $525 million set to expire in BTC and ETH options contracts in the next week, and by expiration date, December will go into options expiry, which may very likely become one of the biggest. But low expectations for volatility remain open. The analysis finds interesting reversals in ETH’s structure, and this isn’t echoed by BTC. It can be clearly noticed that the finance rates sometimes go negative as the spot price goes down hinting at a new phase in the market.

Market Expectations and Volatility Shifts

Despite the realized volatility of BTC and ETH rising, short-term options have not reflected this. The structure of BTC’s volatility is less sensitive to changes in spot prices compared to ETH, whose short-term options are much more sensitive to such moves. Over the past two weeks, the spot price for BTC has 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. Regarding 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 sees the expiration of almost $360 million worth of Bitcoin options (call and put) which should mean that volatility could have its day, influencing how far and fast Bitcoin 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.

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