Bybit Report Shows 5% Premium on BTC Upside Calls Amid Bullish Sentiment

Bybit, the world’s second-largest cryptocurrency exchange by trading volume, has released its latest crypto derivatives analytics report with Block Scholes, highlighting significant movements in the BTC options market. The report outlines BTC’s solid price action in the previous week, with positive movements observed across various cryptocurrencies, including ETH and altcoins.

One of the key insights from the report is the dramatic reversal in BTC's options market sentiment. Following a price surge on July 9th, the put-call skew flipped from a 2% premium favoring downside protection to a 5% premium on upside calls. This shift indicates that traders are increasingly positioning for further BTC price appreciation, despite the asset's already substantial gains. The reversal in the put-call skew suggests a growing bullish sentiment among traders, who are now more optimistic about BTC's future price movements.

The report also notes that perpetual trading volume on Bybit hit a monthly high at $11.1B by the end of the week, following BTC’s breakthrough to $115k on July 9. This surge in trading volume was accompanied by consistently positive funding rates for assets, including BTC, which had only experienced 8 hours of negative funding rates a day before its all-time high (ATH) over Trump’s tariff remarks. The positive funding rates indicate that traders are willing to pay a premium to hold long positions in BTC, further supporting the bullish sentiment in the market.

Altcoins also demonstrated competitive gains against BTC, with ETH and XRP each surging over 6% compared to BTC's relatively modest gains to its new ATH of $112K. While BTC options maintained rangebound implied volatility between 26-35%, the altcoin rally highlighted shifting market dynamics. However, SOL lagged with only a 2% weekly gain despite strong ecosystem fundamentals, including record-breaking Q2 revenue of $271M that outpaced all other Layer 1 and Layer 2 networks.

The report also examined the relative volatility ratios of BTC compared to ETH and SOL. The ratio of ETH's realized volatility to BTC's realized volatility over the past seven days has been significantly high, indicating that BTC's volatility has been falling more rapidly than that of other major cryptocurrencies. This trend suggests that the decline in BTC volatility is unique to BTC and not a broader phenomenon across the crypto asset class.

The analysis further explored whether the entry of institutional buyers through ETFs could be the cause of the low level of BTC volatility. The report found that the decline in BTC volatility coincided with the launch of spot ETFs in the US, suggesting a potential link between institutional ETF flows and the suppression of BTC volatility. However, the report cautioned that more evidence is needed to establish a definitive causal relationship.

In conclusion, the shift in the put-call skew and the historically low levels of BTC volatility in June highlight a significant change in market sentiment and dynamics. The entry of institutional buyers through ETFs may be playing a role in suppressing BTC's volatility, but further analysis is needed to confirm this hypothesis. The differing volatility dynamics between BTC and ETH underscore the importance of ETF activity in shaping the volatility of major cryptocurrencies.