Bybit's Latest Volatility Report Highlights Market Shifts as Crypto Volatility Resurfaces

Bybit and Block Scholes September Volatility Report

In an intriguing turn of events, Bybit, the second-largest cryptocurrency exchange globally by trading volume, has recently released its September Volatility Report in partnership with Block Scholes. This report, titled "Volatility Awakens with the First Term Structure Inversion in Months," sheds light on the recent resurgence of market volatility, primarily driven by disruptions surrounding Bitcoin (BTC) and Ethereum (ETH).

Key Highlights of the Report

The report reveals that BTC's implied volatility saw a significant spike in mid-October after a massive liquidation event, which accounted for a staggering $19 billion — the largest in the history of cryptocurrency. This marked the first term structure inversion for BTC since April 2025, a development attributed to escalating trade tensions between the U.S. and China. In the aftermath of this chaos, prices for BTC and ETH briefly plummeted, reaching $105,000 and $3,700, respectively, before exhibiting signs of recovery.

The volatility report underscores a burgeoning bearish sentiment among options traders, as short-dated BTC puts traded at a robust 13% premium compared to calls. Additionally, an evident collapse in perpetual futures open interest was noted, indicating broader market deleveraging.

Underlying Factors for Rising Volatility

The report emphasizes that the resurgence of market volatility can be traced back to macroeconomic factors. Specifically, tensions escalated following China's imposition of new export controls on rare earth minerals, subsequently leading U.S. President Donald Trump to announce a drastic 100% tariff on Chinese imports. This announcement, which came post-market hours, incited a sharp sell-off across crypto assets over that weekend.

Bybit and Block Scholes further pointed out that for the first time since the previous April, there was an inversion in BTC's volatility term structure, reflecting increased uncertainty in the near term. As realized volatility soared alongside implied metrics, the options market revealed heightened demand for downside protection, reinforcing traders' cautious strategies.

Comparison with Previous Volatility Events

Analysis within the report draws interesting comparisons between the 2025 volatility awakening and a similar surge that occurred in October 2023. Both periods displayed patterns of sustained calm followed by abrupt volatility spikes. However, the catalysts for these episodes differed significantly. While the 2023 volatility was largely anticipated due to optimism surrounding Spot Bitcoin ETFs, the rise in 2025 was rooted in significant macroeconomic stress and risk aversion.

The report ultimately concludes that volatility remains an inherent characteristic of cryptocurrency markets, often capable of reemerging starkly after extended periods of stability. Moreover, it emphasizes how volatility-driven strategies like straddles can enable traders to exploit sharp price movements, regardless of direction.

The comprehensive findings are available for those interested in understanding the complexities of recent market fluctuations in the Bybit x Block Scholes September 2025 Volatility Report. This report underscores the importance for crypto enthusiasts and investors to stay informed and prepared for sudden shifts in market dynamics.