BTC and ETH Defy Expectations: Report Highlights Calm Markets Amid Year-End Options Expiry

BTC and ETH Defy Expectations: Report Highlights Calm Markets Amid Year-End Options Expiry

A recent collaborative study from Bybit and Block Scholes delves into the dynamics of bitcoin (BTC) and ether (ETH) derivatives, revealing surprising market stability during the pivotal 2024 year-end options expiration.

Bitcoin and Ethereum Open Interest: Stability Amid Expiry

The report shared with Bitcoin.com News highlights that open interest in BTC and ETH perpetual swaps remained steady throughout late December, avoiding the elevated levels seen earlier in the month. This equilibrium suggests a reduced dependence on perpetual contracts for hedging expiring options, contributing to the muted market volatility observed.

Seasonal Lulls and Declining Volatility

Bybit and Block Scholes noted that trading activity traditionally slows during the holidays, a trend that coincided with a significant drop in realized volatility. By December’s end, realized volatility for bitcoin reached its lowest levels of the month, defying expectations of heightened market turbulence tied to options expiration.

The report also underscores the implied volatility term structure for bitcoin, which exhibited a pronounced upward slope. Long-dated options achieved an implied volatility of approximately 57%, while one-week at-the-money options lagged by five percentage points. Analysts interpret this as a sign of cautious sentiment among traders, further evidenced by a balanced call-to-put ratio.

Ethereum: Diverging Dynamics

Ethereum’s options market mirrored bitcoin’s overall composure but showed some key differences. Despite substantial December expirations, realized volatility for ETH softened as the year turned, while its implied volatility term structure briefly steepened before reverting to a flatter curve. This deviation from bitcoin’s consistently upward-sloping pattern suggests potential short-term variations in ETH spot prices.

Early 2025 saw a notable rise in interest for ETH call options, signaling growing optimism in the market’s outlook. This uptick highlights the adaptability of ETH derivatives markets and their response to evolving trader sentiment.

Implications for 2025: Balancing Risk and Opportunity

The findings from Bybit and Block Scholes emphasize the interplay between seasonal trading patterns, volatility, and market strategies. As traders navigate 2025’s shifting landscape, the balance between risk management and speculative optimism becomes increasingly crucial.

These trends underscore the growing maturity of crypto markets during the ongoing bull run, pointing to nuanced strategies that could define the next phase of growth and innovation in the industry.