ETH Options Outperform BTC Options as Perpetual Open Interest Plunges

There appears to be a shift of the derivatives tide as of now by Bybit, having known itself as the biggest cryptocurrency trading exchange

Cryptocurrency exchange Bybit has recently announced a partnership with Blocks Scholes to provide derivatives analytics. The data shows that ETH perpetual trades have not risen above their peaks, while BTC currently dominates all forms of perps open interest and activity level.

Both BTC and ETH have retraced in the past week, with BTC moving away from levels around $100,000 and ETH from levels close to $4,000. Analysts expect that open interest in ETH will decrease because it is performing poorly on the spot, while remaining somewhat bullish. The funding rate in the market is currently decreasing due to this cautionary stance.

The report highlights several key trends in the derivatives market. ETH perpetual open interest has plunged due to the liquidation of highly leveraged long positions, which has reduced funding rates. Perpetual activity in BTC, on the other hand, remained largely flat throughout December 2024 but saw a brief spike when BTC crossed above $100K last week.

Following the unwinding of leveraged longs in perpetual swaps, the funding rate has moved into a range of about 0.01%, indicating that the market is adjusting exposure levels to being leveraged and avoiding extreme bearish sentiment.

While ETH perpetual positions have declined, ETH options are outperforming BTC options. Options in ETH are remaining positive as end-of-year expirations approach, although trading volumes have decreased as spot price movements impact the market. Compared to BTC's flat structure, which is driven by realized volatility exceeding forward-looking expectations, ETH options have an inverted term structure.

This report analyzes the trends in spot trading volume, futures, options, and perpetual contracts, providing a detailed overview of the evolution of the cryptocurrency derivatives markets.