The latest crypto derivatives weekly report from Bybit and Block Scholes reveals a sharp rise in bearish sentiment across the cryptocurrency market, driven by renewed macroeconomic uncertainty following U.S. tariff announcements. As global trade tensions escalate, Bitcoin’s options market is showing signs of stress not seen since the first quarter of 2023 banking crisis. Despite a temporary market rebound after a 90-day tariff pause, investor anxiety remains elevated, with out-of-the-money put options dominating short-term volatility.
This deep dive explores the implications of shifting market dynamics, analyzing key metrics such as open interest, funding rates, and options skew — all pointing to growing caution among traders.
Macroeconomic Headwinds Reshape Crypto Sentiment
Recent policy moves linked to escalating trade tensions have triggered broad financial market volatility. The so-called "Liberation Day" tariff announcements disrupted risk-on sentiment globally, impacting equities, commodities, and digital assets alike. Bitcoin (BTC) and Ethereum (ETH) both retreated significantly from their March highs, reflecting heightened risk aversion.
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According to the joint analysis by Bybit and Block Scholes, the initial shockwave sent BTC tumbling to $75,000, prompting a defensive shift in options positioning. Investors rushed to hedge downside risks, leading to a surge in put option volume that now exceeds call activity. This risk-off behavior has pushed the volatility skew for Bitcoin to levels last observed during the regional banking turmoil of Q1 2023.
What makes this episode notable is not just the magnitude of the move, but the persistence of bearish positioning even after partial stabilization. While the announcement of a 90-day tariff truce sparked a relief rally across asset classes, underlying derivatives data suggests skepticism remains deeply embedded in market structure.
Funding Rates Reflect Market Indecision
One of the most telling indicators in perpetual futures markets is the funding rate — a mechanism that balances long and short positions. In healthy bull markets, funding rates tend to stay positive as longs dominate. Conversely, sustained negative funding reflects bearish dominance.
The report highlights that Bybit’s Bitcoin perpetual funding rates briefly turned positive amid early optimism but quickly reverted toward neutral as macro uncertainty re-emerged. This oscillation signals a lack of conviction among traders. Rather than aggressive directional bets, the market is characterized by cautious positioning and frequent reversals.
This neutrality isn’t necessarily bearish on its own, but when combined with elevated put buying, it paints a picture of a market bracing for potential downside while avoiding large leveraged long positions. The absence of strong bullish momentum suggests that any recovery may be fragile unless macro conditions improve decisively.
Open Interest Holds Strong Despite Volatility
Despite the turbulence, total open interest in Bitcoin futures and options has remained resilient. This indicates that while sentiment has soured, there hasn't been a mass exit from positions. Instead, traders are actively managing risk through sophisticated strategies such as protective puts and collar setups.
Notably, the increase in put option demand has led to an inverted volatility curve — a phenomenon where out-of-the-money puts command higher implied volatility than calls. This inversion is typically associated with periods of extreme fear or systemic stress.
“When we see put skew exceeding levels from the 2023 banking crisis, it's a clear signal that institutional and sophisticated retail traders are prioritizing protection over speculation,” notes the report.
Such behavior often precedes either a sharp downturn or a prolonged consolidation phase. Historically, these phases resolve only when macro clarity returns or when positive catalysts restore confidence.
Options Skew Reaches Crisis-Era Extremes
Perhaps the most alarming finding in the report is the degree of put skew currently present in Bitcoin’s options market. Skew measures the premium difference between puts and calls at similar strike prices and expiries. A rising put skew means investors are paying more to insure against drops — a classic sign of fear.
The data shows that current put skew levels have surpassed those seen during the collapse of Silicon Valley Bank and other regional lenders in early 2023. At that time, crypto markets faced liquidity crunches and margin calls; today, similar defensive mechanics are at play amid fears of stagflation and reduced liquidity due to trade barriers.
This level of hedging pressure suggests that many market participants expect continued volatility or even further downside over the coming weeks. It also implies limited appetite for new upside bets until trade policy risks are better understood.
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FAQ: Understanding the Current Crypto Derivatives Landscape
Q: What does rising put option volume indicate about market sentiment?
A: Increased put buying typically reflects defensive positioning. Traders are either hedging existing holdings or speculating on price declines. When put volume outpaces calls significantly, it signals growing bearishness or risk aversion.
Q: Why is funding rate neutrality significant during volatile periods?
A: Neutral funding rates suggest neither bulls nor bears are dominating the market. In uncertain times, this lack of directional bias often precedes breakout moves — either up or down — once clarity emerges.
Q: How does open interest stability impact price outlook?
A: Stable or rising open interest during drawdowns indicates that selling pressure isn’t causing widespread liquidations. Instead, positions are being rolled or hedged, which can lead to tighter ranges and potential reversals if sentiment shifts.
Q: What causes volatility skew inversion?
A: Skew inversion occurs when demand for downside protection (puts) exceeds demand for upside leverage (calls). This is common during geopolitical shocks, regulatory fears, or macroeconomic instability.
Q: Can tariff policies really affect cryptocurrency prices?
A: While crypto is decentralized, it doesn’t exist in a vacuum. Trade wars impact global liquidity, investor risk appetite, and currency values — all of which influence capital flows into and out of digital assets.
Q: Is this situation worse than the 2023 banking crisis for crypto?
A: Not necessarily in terms of systemic collapse, but the derivatives data shows comparable levels of fear. The key difference is today’s market is more mature, with better risk management tools and deeper institutional participation.
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Conclusion: Caution Dominates Amid Policy Uncertainty
The latest findings from Bybit and Block Scholes underscore a critical juncture for the crypto market. While prices have stabilized somewhat following temporary trade de-escalation, derivatives metrics reveal deep-seated caution. Elevated put skew, neutral funding rates, and resilient open interest collectively point to a market preparing for further turbulence rather than betting on sustained rallies.
For investors, this environment calls for disciplined risk management and close monitoring of macro developments. Historical parallels suggest that once policy clarity returns — whether through resolved trade disputes or central bank action — markets can rebound swiftly. Until then, defensive positioning is likely to remain prevalent.
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