Derivatives Sentiment Improves as Bitcoin Rises to 2-Month High: Bybit Report

Bybit’s Risk-Appetite Index has recorded an uptick, suggesting that some traders have opened open positions to catch any further rallies in apparent prices.

The derivatives market is seeing a change in sentiment, with rates and open interest rising. A report by Crypto Derivatives Analytics from trading platform Bybit and research firm Block Scholes revealed that this change was caused by the recent discovery of bitcoin (BTC) and the move to the upper range of $90,000.

According to analysts, the explosion of bitcoin has been accompanied by the growth of future open interest and high levels of funding for many altcoins. This is reflected in futures structures that converge at the same levels and short-term options that move toward a neutral volatility kew.

Derivatives Emotions Develop

Before the price rally, BTC is trading between $85,000 and $95,000. The breakout of the $97,000 region resulted in an increase in open interest past $8 billion across all nine major coins. As BTC improved, the altcoin market was lifted and open interest returned to levels seen earlier in the year when BTC rose to $94,000.

Bybit’s Risk-Appetite Index has recorded an uptick, suggesting that some traders have opened open positions to catch any further rallies in apparent prices. These price changes are supported by the flow of altcoin exchange-traded funds (ETFs). Both ether (ETH), Solana (SOL), and the XRP ETF have seen consecutive multi-day inflows this past week.

As for Bitcoin options, the exit had little impact on market volatility (ATM). Although perceived volatility increased late last week after going sideways, short-tenor volatility has fallen by about 22% over the past 12 months. Analysts say it is not surprising that the volatility of the options market has continued its decline, as the price of bitcoin has traded chop sideways in the past month.

Will Positive Change Come?

Nevertheless, derivatives market conditions support the continuation of bitcoin’s recent rally. There are signs of strong determination for strong exposure, and a volatile smile of short-term options to a neutral skew from bearish positions. Also, the market sees seven-day futures trading at a 10% premium over the spot price.

Amidst this significant volatility in derivatives, there is concern that BTC hovering around $95,000 will not be enough to support the transition from bearish to neutral. While the market is yet to see a short-term volatility smile fully tilting to calls, historical patterns suggest that bitcoin’s failure to hold $95,000 will trigger a return to premium put.

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