Crypto Derivatives Market Cautiously Regains Stability After October’s Deleveraging Event: Bybit Report

It has been almost a month since the crypto market experienced one of its largest liquidation events in history, but the effects of that incident still linger. A joint crypto derivatives report from the crypto exchange Bybit and the investment research institute Block Scholes has revealed that traders are cautiously finding ￰0￱ defensive stance has spread across the derivatives market, affecting both crypto options and perpetual ￰1￱ of Liquidation Event Linger Bybit learnt that the notional open interest in perpetual contracts has remained stagnant below $10 billion since the massive liquidation ￰2￱ that renewed trade tensions between the United States and China triggered the market-wide ￰3￱ stated that the event had a significant impact on its perpetual swap markets, and traders are now showing little appetite to re-enter their previously lost ￰4￱ ￰5￱ Chinese governments made some diplomatic progress after the incident.

However, Fed Chair Jerome Powell’s hawkish tone during the following FOMC meeting sustained the bearish ￰6￱ exhibited more risk-off reactions as bitcoin (BTC) plummeted to $107,000, and short-tenor put-call skews tilted sharply bearish. Currently, bitcoin and ether (ETH) volatility skews in the options market have now reverted to downside bias after briefly favoring ￰7￱ structures for both assets have normalized, but at-the-market volatility is still ￰8￱ indicates sustained demand for optionality even as the current environment is historically known for low ￰9￱ Take Defensive Stance While open interest in the futures market remains flat, that of the options sector has steadily ￰10￱ open interest still accounts for roughly half, with the remaining spread across eight tracked ￰11￱ current market conditions reflect a lack of momentum and the decoupling of cryptocurrencies from the broader risk-on sentiment, options open interest levels mirror those seen before the liquidation event.

Furthermore, options open interest reflects a defensive stance and consistent demand from traders for short-term ￰12￱ participants are also hedging via options. “Traders have shown a willingness to push up short-tenor volatility during stress events, briefly inverting the ￰13￱ the inversion was short-lived, it left behind a higher baseline in volatility pricing, particularly concentrated in put options,” Bybit and Block Scholes explained. Meanwhile, Bybit stated that BTC has been confined to the $105,000–$115,000 ￰14￱ asset fell below the range on Tuesday to $99,000. BTC was trading slightly above $101,800 at the time of writing, per data from CoinMarketCap.