Bybit, the world’s second-largest crypto exchange by trading volume, in collaboration with BlockScholes, is pleased to release the latest edition of the Crypto Derivatives Analytics Report. This week’s report delves into the increasing impact of the upcoming U.S. presidential election on the crypto derivatives market, uncovering how this major event is driving sentiment, influencing volatility, and shaping trading patterns in both Bitcoin (BTC) and Ethereum (ETH) derivatives.
Key Highlights:
1. Futures Markets Show Muted Activity Amid Low Volatility
The report highlights a noticeable decline in trading activity within the BTC and ETH futures markets, driven by a period of low realized volatility in spot prices. Both BTC and ETH have experienced subdued trade volumes, with open interest levels remaining below recent highs following the sell-off that led many traders to close their positions. The report also identifies a recurring weekly pattern of lower trade volumes on Sundays, disrupted only during extreme market volatility, suggesting an underlying seasonality in trading behavior.
2. Options Markets Signal Growing Election Premium
Despite the overall bearish sentiment toward ETH compared to BTC, evidenced by negative funding rates and a strong skew toward out-of-the-money (OTM) puts for short-dated expirations, the report reveals an intriguing shift in the options market. There is a growing premium being priced in for the U.S. presidential election on November 5, 2024. This is most evident in the stronger skew toward OTM calls for BTC and ETH options expiring after the election, signaling increased bullish sentiment as traders brace for potential market-moving events.
3. Volatility Term Structures Suggest Elevated Event Risk
Volatility term structures have reverted to a steep shape, with short-dated volatility falling rapidly alongside the decline in realized volatility. However, the report points out that longer-dated tenors remain significantly elevated, indicating that the market is beginning to factor in a potential event risk associated with the upcoming election. Interestingly, this election premium stands out, as similar event risks are not being priced in for the Jackson Hole Symposium at the end of August or the FOMC meeting in September.
