Bybit’s Risk-Appetite Index registered a rise, indicating that some traders have opened perpetual positions to accommodate any further increases in spot prices.
The derivatives market is witnessing a change in sentiment with funding rates and open interest rising. A Crypto Derivatives Analytics report from trading platform Bybit and research firm Block Scholes attributed this change to Bitcoin’s (BTC) latest recovery and move into the upper $90,000 range.
According to analysts, Bitcoin’s breakout coincided with rising open interest on perpetual futures and higher funding rates on several altcoins. This is reflected on futures term structures cluster at similar levels and short-dated options move toward a neutral volatility skew
Derivatives sentiment improves
Before the price rally, BTC was trading between $85,000 and $95,000. The breakout in the $97,000 region caused open interest to rise by more than $8 billion on nine major coins. As BTC recovered, the altcoin market lifted and open interest returned to the levels seen at the beginning of the year, when BTC rose to $94,000.
Bybit’s Risk-Appetite Index recorded a rise, indicating that some traders were opening perpetual positions to accommodate any further increases in spot prices. This turnaround in spot price movement was supported by flows into altcoin spot exchange-traded funds (ETFs). Both Ether (ETH), Solana (SOL) and XRP ETFs have seen several consecutive days of inflows over the past week.
As for Bitcoin options, the outbreak had little impact on market (ATM) volatility levels. While realized volatility peaked late last week after a sideways move, short-term implied volatility has been lower at around 22% over the past twelve months. Analysts say it is not surprising that volatility in the options market has continued its downward trend as Bitcoin’s price has undergone a sideways move over the past month.
Will the positive change last?
Nevertheless, conditions in the derivatives markets support a continuation of the last bitcoin rally. There are signs of a strong appetite for leverage exposure, with volatility for shorter-dated options moving from bearish positions to a neutral skew. The market is also seeing a seven-day futures trade at a 10% premium over the spot price.
Amid this noticeable shift in derivatives sentiment, there are concerns that a BTC value of around $95,000 would not be enough to support the change from bearish to neutral. While the market has yet to see the short-lived volatility smile move fully toward calls, historical patterns suggest that Bitcoin’s inability to sustain $95,000 will lead to a return to the put premium.
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