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Bybit and Block Scholes Report on Crypto Volatility

In a recent comprehensive analysis by Bybit, the world’s second-largest cryptocurrency exchange by trading volume, critical insights into cryptocurrency market behavior were unveiled. The joint report with Block Scholes sheds light on the heightened volatility in the cryptocurrency space as investors adjust their expectations regarding U.S. monetary policy.

Key Findings

The report highlights several noteworthy findings that capture the current state of the market:

• - A broad selloff across the crypto market correlating with other global financial assets.
• - A sharp increase in short-term implied volatility for major cryptocurrencies, notably Bitcoin and Ether.
• - Despite substantial price declines, the response in longer-term implied volatility was limited.
• - Participation in derivatives trading remains tepid, marked by lowered trading volumes.

Market Dynamics

The analysis reveals that cryptocurrencies have been swept up in a larger global selloff, which has been catalyzed by a rapid adjustment in the outlook for Federal Reserve policy and a resurgence in the strength of the U.S. dollar. In a 24-hour period, approximately 4.7% of the total crypto market capitalization was erased, predominantly affecting major tokens.

Bitcoin's price plummeted to around $81,000, representing more than 30% below its peak of $126,100 on October 6, 2025. Likewise, Ether fell below the notable $2,700 threshold, straying below the critical $3,000 level. Analyzing their performance year-to-date, Bitcoin and Ether have both seen declines of over 5% and 8%, respectively.

Volatility Trends

The repercussions of this selloff manifested in the volatility metrics of these cryptocurrencies. For instance, the one-week at-the-money implied volatility skyrocketed to approximately 46% for Bitcoin and around 58% for Ether. Interestingly, the volatility for longer durations did not exhibit a comparable increase, indicating that traders might be focusing more on short-term uncertainties rather than anticipating prolonged stress in the market.

Cautious Market Participation

The derivatives market specifically reflects a cautious approach among participants, with the open interest in perpetual futures contracts not experiencing the same sharp decline as spot prices. It remains significantly below the levels noted before the liquidation event in October 2025. Moreover, daily trading volumes have diminished compared to the vibrant activity observed in the earlier months of 2025, signaling ongoing wariness among market players.

Han Tan, Chief Market Analyst at Bybit Learn, commented on the situation: "Cryptos have been caught up in the selloff across global assets, as markets aggressively reprice the Fed policy outlook under a presumably less-dovish Fed Chair. With U.S.-listed Bitcoin ETFs recording three consecutive months of net outflows, traders will remain vigilant regarding the $80,000 support level. A significant breach below this psychological line might lead Bitcoin further down into the mid-$70,000 range, revisiting levels not seen since the aftermath of the Liberation Day."

Implications of Federal Communications

The report also highlights a significant observation regarding the Federal Open Market Committee's communications. Irrespective of a somewhat hawkish tone and an insistence on a wait-and-see stance, the implied volatility for longer tenors concerning both Bitcoin and Ether has continued to decline since hitting its peak in late 2025.

In summary, this analysis indicates that while short-term volatility has visibly intensified, the lack of sustained escalation in longer-term volatility and trading engagement illustrates an environment characterized by restrained participation and cautious positioning. Interested parties can access the full Bybit x Block Scholes report for more detailed insights.

For more information and updates, visit Bybit.com.