The cryptocurrency market is showing signs of stabilization after recent volatility, according to the latest Bybit x Block Scholes Crypto Derivatives Analytics Report. Bybit, the world’s second-largest crypto exchange by trading volume, collaborated with Block Scholes to analyze market dynamics, derivatives activity, and macroeconomic factors influencing digital asset sentiment.
The findings suggest a slow-but-steady recovery in both spot and derivatives markets, signaling renewed confidence among traders.
Perpetual swaps reflect cautious optimism
Perpetuals have provided early insights into market positioning. During the deepest phases of the recent downturn, altcoin perpetual funding rates underperformed, signaling strong demand for short exposure as traders positioned for further declines. In contrast, BTC and ETH perpetual markets remained stable, consistently recording positive funding rates.
As conditions improved, several large-cap altcoins—including SOL, TON, CRV, and ADA—posted positive funding rates, reflecting a rebound in spot prices and reduced pressure on short positions. This recovery demonstrates that derivatives markets often lead sentiment indicators, as funding rates adjust to shifts in trader behavior before spot markets fully reflect these changes.
Altcoin vs. BTC and ETH dynamics
Altcoins experienced notable underperformance relative to BTC during the sell-off. Leveraged short positions in altcoin pairs were charged fees, reflecting market caution. Meanwhile, BTC and ETH not only avoided these costs but maintained positive funding throughout, highlighting their role as relative safe havens during periods of heightened volatility.
This divergence provides valuable lessons for traders and portfolio managers: BTC and ETH often stabilize funding rates and can act as anchors in turbulent markets, while altcoins remain more sensitive to short-term bearish sentiment.
Options market signals moderation in risk expectations
Options data in the Bybit x Block Scholes report reveals a normalization in short-tenor implied volatility. Last week’s extreme levels have declined, reducing premiums for near-term downside protection. Put skew has eased as well, indicating moderated expectations for immediate price declines.
BTC options specifically reflect this stabilization, trading above 91,000 USDT after revisiting levels not seen since April 2025. While traders still hedge against downside risk, the moderation in skew and volatility suggests a gradual shift from panic to cautious optimism.
Risk appetite indicators
Block Scholes’ Risk Appetite Index, which measures market euphoria (above 1) or panic (below -1), shows a strong correlation with spot returns. Current momentum suggests a more balanced market environment, with BTC and ETH funding rates as positive outliers during the recent sell-off. This index reinforces the idea that sentiment recovery is underway but still fragile, particularly in altcoin markets.
Block Scholes’ Risk Appetite Index measures the level of euphoria (above 1) or panic (below -1) in the spot market. Momentum in this index shows a strong relationship to spot returns. Image: Bybit.
Macroeconomic factors underpinning recovery
The gradual lift in crypto sentiment aligns with broader macroeconomic developments. The end of the recent U.S. government shutdown has clarified economic data, improving visibility for market participants ahead of the Federal Reserve’s December 10, 2025 policy meeting.
Fed official John Williams signaled that a further 25-basis-point rate cut may be possible, with market-implied odds exceeding 80 percent. This expectation of looser monetary policy, coupled with gains in traditional risk assets like the S&P 500, has helped bolster crypto market confidence.
For traders looking to integrate macro trends into strategy, Investopedia’s Fed policy guide is a useful resource.
Derivatives participation remains subdued
Despite recovery signals, participation in derivatives markets remains relatively low. Open interest and trading volumes across perpetuals and options have yet to return to pre-liquidation levels, reflecting ongoing caution among market participants.
Bybit BTC/USDT Options Volumes. Image: Bybit.
This subdued engagement highlights a key point: recovery in sentiment does not immediately translate into high trading activity. Traders are slowly testing the market, balancing optimism with risk management after the November 10, 2025 liquidation events.
Key takeaways for traders and investors
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BTC and ETH remain resilient: Their perpetual funding rates and options data indicate they continue to anchor sentiment in the market.
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Altcoins are more reactive: While showing positive funding during recovery, altcoins are still sensitive to short-term bearish pressures.
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Options markets moderate risk expectations: Falling short-tenor implied volatility and easing put skew suggest traders are cautiously optimistic.
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Macro clarity supports recovery: Expectations of a Fed rate cut and gains in traditional risk assets reinforce crypto sentiment.
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Participation is cautious: Low open interest and volumes indicate that while sentiment is improving, traders remain risk-conscious.
For broader insights on market recovery trends and derivative analytics, Bybit Research provides ongoing reports and detailed analyses of crypto market dynamics.
Frequently Asked Questions
What does a positive funding rate indicate in perpetual swaps?
A positive funding rate means long position holders pay short position holders. This generally reflects strong demand for long exposure and confidence in upward price movement, as seen with BTC and ETH during recent recovery.
Why have altcoins underperformed BTC and ETH recently?
Altcoins tend to be more sensitive to short-term bearish sentiment. Leveraged shorts and lower liquidity can amplify price swings, making altcoin funding rates fluctuate more than BTC or ETH.
How does implied volatility affect options pricing?
Higher implied volatility increases premiums for options, particularly for downside protection (puts). As volatility normalizes, options costs decline, reflecting reduced market fear.
What macro factors are influencing crypto recovery?
Key drivers include U.S. economic data post-government shutdown, expected Federal Reserve rate cuts, and overall improvements in risk-on sentiment in traditional markets like equities.
Is the market fully recovered?
No. While sentiment is improving and derivatives data show cautious optimism, participation remains subdued. Traders are gradually returning, balancing recovery signals with ongoing risk management.
