Bybit & Block Scholes Signal Crypto Winter: Bearish Sentiment Grips Markets
Crypto's mood turns frosty as heavyweights flash warning signs.
Bearish indicators pile up
Major platforms sound alarms while traders scramble for cover. Volatility's back on the menu—and it's serving liquidations.
Remember when 'buy the dip' worked? Good times.
TLDR
- Bybit and Block Scholes report bearish crypto sentiment despite US shutdown resolution.
- Bitcoin drops below $100K as weak sentiment persists across crypto derivatives.
- Open interest in large-cap perpetuals remains down nearly 50% since October.
- Bearish positioning is seen in options markets with implied volatility skewed toward puts.
Bybit, in collaboration with Block Scholes, has released a new report shedding light on the current state of the crypto markets. Despite the resolution of the US government’s longest shutdown in history, the report indicates that bearish sentiment remains strong. The latest data points to a lack of confidence in the crypto market, as Bitcoin and other major cryptocurrencies face significant downward pressure.
The report notes that, although US equity markets initially rallied after President Trump’s signing of legislation to reopen the government, those gains were short-lived. By Friday, equities had retraced most of their gains, which in turn added pressure to the crypto market. bitcoin fell below the critical $100,000 level, and by the end of the week, it was trading near $96,000, reflecting a significant downturn.
Bitcoin Faces Repeated Rejection of Recovery Attempts
One of the key takeaways from the report is that Bitcoin’s attempts to recover from the recent sell-offs have been repeatedly rejected. The crypto market has struggled to regain momentum after the sharp declines seen in October and November. For instance, Bitcoin’s brief rise to $107,500 on November 10 following positive developments in the Senate was quickly reversed, as traders sold off the cryptocurrency.
This ongoing rejection of price recovery efforts indicates a fragile sentiment in the market. The report points out that volatility remains high, with implied volatility suggesting continued downside risks. Options markets show a skew toward put options, signaling that investors expect further declines in the short term.
Lower Leverage and Hesitation in Rebuilding Long Positions
Another crucial observation from the Bybit and Block Scholes report is the significant reduction in open interest in large-cap perpetuals. Open interest has dropped nearly 50% from the highs observed in early October, reflecting a cautious approach among traders. This decline in open interest came after Bitcoin’s sharp price reversal from its all-time high, which triggered a wave of liquidations.
The report indicates that, despite the drop in Bitcoin’s price, the recent downturn did not lead to a major liquidation event. This suggests that traders are using lower leverage, likely due to the ongoing uncertainty in the market. Many traders are hesitant to rebuild long positions, further contributing to the bearish trend observed across crypto derivatives.
Bearish Sentiment Dominates Crypto Derivatives Markets
The report highlights that the crypto derivatives market is still dominated by bearish sentiment. Funding rates for perpetual swaps are mixed for large-cap cryptocurrencies, but they remain consistently bearish for altcoins. This reflects the overall market sentiment, where investors remain skeptical about any significant price recovery in the NEAR term.
Implied volatility and the shape of volatility smiles in options markets indicate that the downside risk is being priced in. The skew toward put options suggests that traders expect further price drops. Even with the resolution of the US government shutdown, which briefly boosted broader market sentiment, the crypto market continues to struggle with weak investor sentiment and a lack of clear direction.
