Our weekly crypto derivatives analytics report delves into macro events, the current state of crypto and trading signals from spot trading volume, and futures, options and perpetual contracts.

BTC’s spot price has reached an all-time high, yet the derivatives markets have not shown the same bullish leverage as in previous records this quarter. This discrepancy is likely due to a 

 last week, which has brought funding rates back to normal levels, slowed the growth of futures yields and reduced the preference for call options. Exposure in the futures market remains concentrated in December’s end-of-year BTC contracts, with little growth observed during the recent spot rally. In the perpetuals market, funding rates have returned to default levels after a period of excessive leverage. 

Meanwhile, in the options market, open interest in ETH call options is still far higher than that of OTM puts, suggesting that traders have not yet been shaken out of bullish ETH positioning in options.

Please check out the report’s highlights.

BTC Futures Volume Trends Down Despite New ATH

BTC has dominated trading volumes since the reset of leveraged positions early last week. However, despite reaching another record-high spot price, trading volumes have been declining since Dec 9, 2024. Open interest in BTC contracts is concentrated in December’s end-of-year contract, which has a higher open interest than all ETH contracts combined. This suggests a more cautious market than before the recent wave of liquidations, indicating that the bullish rally in spot prices is occurring alongside healthier leverage levels in the derivatives markets.

This week, the rise in BTC spot prices to new all-time highs has coincided with a decline in open interest for both BTC and ETH perpetual swap contracts. This suggests that, despite falling funding rates, traders still seek exposure through these contracts. Recently, ETH has experienced a more significant decrease, while BTC's open interest has fluctuated less. This trend reflects the differing performances of their spot prices; BTC has surged higher, while ETH has remained relatively rangebound, struggling to break above the psychological barrier of $4K.

Open interest in ETH call options remains significantly higher than in OTM puts, indicating that traders retain their bullish positioning in ETH options. While OTM calls dominate the open interest across various tenors, longer-dated OTM puts have seen notable trade volume over the past 10 days. However, this has not resulted in an increase in open put options, suggesting that demand for downside protection hasn’t risen as expected.

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Dec 18, 2024): BTC Notches ATH Following Last Week’s De-leverage; ETH Options Send Bullish Signal Still

Bitcoin has achieved a remarkable milestone, surpassing a market value of $107.8K.

Bitcoin has achieved a remarkable milestone, surpassing a market value of $107.8K. This surge can be attributed to a combination of persistent disbelief among retail investors and aggressive accumulation by institutional players. Recent excitement has been further fueled by Donald Trump's pro-crypto stance. His announcement to appoint 

 has been met with enthusiasm, especially since it signals the removal of Gary Gensler, who has often been viewed as an obstacle to crypto growth. As Trump reiterated his plans for a U.S. strategic Bitcoin reserve, the sentiment in the crypto community has grown increasingly positive, suggesting a potential shift in regulatory dynamics that may benefit the market.

Meanwhile, the number of wallets holding between 100 to 1,000 BTC has risen significantly. In the past month, there’s been a net increase of 1,289 such wallets on the Bitcoin network, representing 9% growth in a short time frame. Moreover, these wallets have collectively added approximately 214,900 BTC to their holdings, marking a 5.1% increase in total assets.

Institutional Influence and MicroStrategy's Role

The current Bitcoin rally differs from previous ones, being primarily institutional-driven rather than retail-focused. MicroStrategy’s Executive Chairman, Michael Saylor, has made significant Bitcoin purchases, recently acquiring over 36,900 BTC. This has led to mixed reactions on social media: while many praise Saylor as a visionary, critics express concerns about the company's reliance on borrowed funds for these acquisitions. The market's response to MicroStrategy's buying spree underscores its influence on Bitcoin's perception as a legitimate investment. Additionally, rising metrics, such as daily active addresses and an increase in higher-tier Bitcoin wallets, indicate growing utility and institutional interest in Bitcoin, suggesting a more sustainable path for this bull market.

Chainlink has emerged as a key player in the crypto space, achieving a 51% increase in December 2024. Its advancements in the CCIP have attracted traditional financial institutions, further legitimizing its technology. The launch of Chainlink’s new staking program has not only increased user engagement, but has also reduced selling pressure. Meanwhile, the MOVE token, part of The Movement Network, experienced an impressive 84% rise shortly after its debut, driven by airdrop events and exchange listings. Despite concerns about potential sell-offs, MOVE’s innovative approach positions it well for future growth in the Ethereum scaling landscape.

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Bitcoin Tests New ATH as Wallets Holding Bitcoin Surge to New Highs; LINK and MOVE Outperform

BTC’s rejection of prices above $100K and ETH’s downward bounce near $4K have had a significant impact on derivatives markets. The pullback in spot prices intensified due to liquidations of overleveraged long positions in perpetual swaps, leading to a decline in open interest, particularly in ETH, and a reset of previously high funding rates to lower, yet still positive, levels. 

In the futures market, open interest remains below pre-November 2024 expiration levels, with positions concentrated in the December end-of-year contract. Meanwhile, perpetuals funding rates have been recalibrated following the liquidation wave. In options, ETH’s term structure is inverted, contrasting with BTC’s flat shape, as realized volatility has exceeded forward-looking expectations for the second time since late September.

The surge in ETH perpetual positions that contributed to last week’s increase in open interest has now reversed. This shift coincides with a sharp decline in funding rates for the contracts, suggesting it was driven by the liquidation of overleveraged long positions. Notably, despite a similar drop in funding rates for long positions, activity in BTC perpetual contracts has remained mostly stable throughout December 2024, spiking only during BTC's brief rise above $100K late last week.

The previously high and exuberant funding rates in nearly all perpetual markets (as noted in last week’s analysis) have subsided following a substantial liquidation of heavily leveraged long positions. Although this shift reflects much lower levels of bullish positioning, funding rates haven’t plummeted to significantly negative levels after the flash sell-off, and are currently trading sideways around 0.01%. This behavior suggests a reset in leveraged exposure, typically seen when expectations for further spot rallies become overly optimistic.

Unlike the balanced levels in BTC options markets, ETH's open interest remains tilted toward bullish calls, primarily set for December’s end-of-year expiration. However, trading volumes have decreased during the recent period of sideways spot price movement. The volatility term structure remains inverted, as longer-dated volatility expectations remain anchored around 70%, while shorter-dated expirations have reacted to spot price fluctuations following the Nov 5, 2024 U.S. elections.

Bybit X Block Scholes Crypto Derivatives Analytics Report (Dec 11, 2024): ETH Perp Positions Fall as ETH Options Still More Bullish Than BTC Options

Dec 9, 2024: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

 explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Weekly Highlight — U.S. Payroll Rebounds While Unemployment Increases 

In November, U.S. hiring showed a notable increase, with nonfarm payrolls rising by 227,000, following a revised gain of 36,000 in October, which was affected by storms and strikes. Despite the growth in payrolls, the unemployment rate rose to 4.2%, indicating a cooling labor market rather than a significant decline. Average payroll growth over the past three months was 173,000, a decrease from earlier in the year, suggesting a moderation in hiring.

The uptick in the unemployment rate can be attributed to an increase in long-term joblessness, which is the highest it’s been in nearly three years. This has led traders to speculate that the Federal Reserve may consider another interest rate cut at its upcoming meeting from Dec 17–18, 2024. The data, adjusted for disruptions like the Boeing strike and hurricanes, supports the Fed's assessment that although the labor market remains solid, it’s less of a driver for inflation.

Fed Chair Jerome Powell has indicated that recent rate cuts aim to bolster the labor market, although some policymakers suggest a pause on further cuts may be needed, as the economy is showing resilience. The report highlights a mixed job landscape, as hiring has been strong in healthcare, hospitality and government, while retail has seen significant job losses.

The labor force participation rate fell to 62.5%, the lowest since May, and the number of people unemployed for over 27 weeks increased, reflecting longer job search times. Overall, while layoffs remain low, some major companies have announced head count reductions. Wage growth has stabilized, suggesting that demand for new hires is moderating.

Weekly Crypto Highlight — Retail Is Coming Back With Altcoins Surging, as Bitcoin Breaks $100K With Whales’ Accumulation

Token Sentiment Across Social Media. Sources: Bybit, Santiment

The cryptocurrency market is witnessing remarkable growth, particularly in major assets such as XRP, Cardano (ADA) and Stellar (XLM). XRP has surged by an impressive 444%, while ADA and XLM have seen increases of 280% and 512%, respectively. This surge is largely attributed to aggressive accumulation by whale investors and cautiously optimistic sentiment within the crypto community.

 activity plays a crucial role in shaping current market dynamics. Since mid-October 2024, whale wallets have accumulated a total of 91,856 BTC, significantly contributing to Bitcoin’s price increase. In contrast, there’s been a decline in 

 holdings among these wallets, indicating a strategic shift toward investing in more volatile cryptocurrencies rather than maintaining stable asset positions.

In addition to whale accumulation, the cryptocurrency landscape is evolving with several trends emerging. Interest in 

 is waning as investors pivot toward more sustainable projects with long-term potential. This shift reflects a growing desire for robust investments instead of speculative plays.

The integration of AI into blockchain ecosystems is another transformative trend. 

 are enhancing transaction processing efficiencies and supporting the development of virtual economies, creating new opportunities for innovation.

Moreover, hyperliquid token generation events (TGEs) are gaining traction. These innovative mechanisms improve liquidity and enhance the trading experience, addressing challenges that have historically plagued new tokens.

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Weekly Institutional Insights: Bitcoin Reaches $100K, Altcoins Surge, U.S. Payroll Increases

BTC has finally surpassed the $100K mark, leading to increased bullish positioning in derivatives markets. This reflects strong sentiment and a desire for upside exposure in perpetual swaps and futures. Short-term implied volatility has risen as traders seek options to capitalize on the rally.

BTC's successful breach of the $100K barrier has led to a noticeable return of perpetual swap markets to all-time high open interest levels, although the response has been somewhat muted. Earlier in the week, perpetual swap markets shifted their focus to ETH after BTC's repeated failures to break through $100K. While funding rates for both derivatives remained high and positive, open interest in ETH contracts increased at the expense of BTC positions prior to the breakthrough. Additionally, ETH trade volumes have constituted a larger-than-usual market share.

BTC Calls See No Significant Influx Post-$100K

The sudden rise in spot prices has triggered a sharp increase in demand for short-tenor options, as traders seek exposure to the upward movement. BTC's term structure inversion has driven short-tenor implied volatility levels above realized volatility. Although implied volatility for BTC is lower than that of ETH, open interest data shows that the influx of call option open interest in BTC markets wasn’t as significant as for ETH. Nevertheless, BTC's volatility skew remains strongly bullish.

ETH's options market showed the most bullish positioning ahead of the overnight spot move, while the perpetual swap markets for both major cryptocurrencies reflected strong positive sentiment. Open interest is heavily weighted toward OTM calls, signaling a robust preference for upside exposure as realized volatility starts to catch up to implied volatility. This demand for upside exposure is evident for both tokens, particularly with ETH's remarkable increase in call option open interest over the past 24 hours.

Bybit X Block Scholes Crypto Derivatives Analytics Report (Dec 5, 2024): After BTC Turns $100K, Investors Are Still More Bullish on ETH

The cryptocurrency market is experiencing unprecedented growth, particularly in major assets like XRP, Cardano (ADA) and Stellar (XLM).

The cryptocurrency market is experiencing unprecedented growth, particularly in major assets like XRP, Cardano (ADA) and Stellar (XLM), whose tokens have seen substantial price increases (XRP up 444%, ADA 280% and XLM 512%). This surge is being driven largely by aggressive accumulation from whale investors, as well as cautious but optimistic sentiment in the crypto community. 

Meanwhile, interest in meme coins is declining as investors shift focus to more sustainable projects. The integration of AI in blockchain ecosystems and the emergence of hyperliquid token generation events (TGEs) are also reshaping market dynamics, indicating a transformative phase for cryptocurrencies.

Significant Growth in Major Cryptocurrencies

The report highlights impressive price increases for several major cryptocurrencies:

Despite these gains, general sentiment in the crypto community remains cautiously optimistic.

 activity is a key factor in current crypto market dynamics:

Since mid-October, there’s been considerable accumulation of Bitcoin by whale wallets, which have added a total of 91,856 BTC. This accumulation has played a substantial role in driving up BTC’s price.

In contrast, there’s been a decline in stablecoin holdings among these wallets, suggesting a strategic shift toward investing in cryptocurrencies, rather than choosing to hold stable assets.

The following several emerging trends are reshaping the cryptocurrency landscape.

Overall, our report underscores a transformative period in the cryptocurrency market, characterized by significant asset growth, strategic whale behavior and the integration of advanced technologies.

Whales Accumulate Bitcoin as It Reached $100K; Emergence of AI Agent

Our monthly option volatility report delves into insights from options volatility to inspire your next crypto move.

Option volatility outlines a compelling narrative for Bitcoin as it approaches the $100K milestone. Leading up to the U.S. election on Nov 5, 2024, Bitcoin's implied volatility experienced a dramatic surge, with short-term implied volatility rising approximately 25 percentage points above post-election expirations. This spike indicated strong bullish positioning in the derivatives market as traders sought to capitalize on anticipated price movements driven by electoral outcomes.

In the immediate aftermath of the election, there was a sharp decline in short-term volatility, aligning with a rally in spot prices that, in turn, led to higher realized volatility. However, the decline in implied volatility didn’t reflect a long-term bearish sentiment — instead, it suggested a temporary easing of uncertainty regarding the election results. The term structure of implied volatility demonstrates a complex relationship: while short-term volatility dipped, longer-dated options remained stable above 50%.

The call/put skew indicates strong demand for bullish call options relative to bearish puts since the election, reflecting heightened upside exposure during BTC and ETH rallies. However, when BTC retraced to $91.3K, the skew shifted 6% toward puts, signaling bearish sentiment. This was inconsistent with futures markets, in which prices remained above spot levels, indicating ongoing bullishness. The skew toward OTM puts arose from increased demand for protective hedges, rather than from a lack of call interest. Ultimately, this suggests traders believe any sell-off would be temporary, supporting the idea that volatility is necessary in order for BTC to reach the $100K mark.

In contrast to Bitcoin, Ethereum (ETH) has emerged as a more consistently bullish asset in recent weeks. While both BTC and ETH exhibited similar volatility patterns immediately following the election, Ether has shown notable resilience and increased momentum, particularly in the wake of Gary Gensler's resignation. This political shift has positively influenced ETH’s market dynamics, resulting in a stronger demand for ETH options.

Ether outperformed Bitcoin during critical market events, including both the election and ETF announcements in 2024. Following Gensler's resignation, ETH gained significant traction, with traders increasingly focusing on Ethereum as a more attractive investment. This shift is evident in the significant drops in the ratio of BTC-to-ETH spot price, indicating that traders are reallocating their preferences toward ETH.

The divergence in implied volatility between BTC and ETH options further underscores this trend, as the ratio of implied volatility for ETH options has surpassed that of BTC, reflecting a stronger demand for ETH optionality. Historically, ETH has exhibited higher volatility compared to Bitcoin. This recent uptick in ETH's implied volatility reestablishes the typical pattern of ETH commanding a premium in the options market.

Moreover, the skew in options pricing has shifted in favor of calls for both BTC and ETH, but ETH's skew has remained more robust. This suggests a stronger bullish sentiment for ETH, as traders are positioning more aggressively for its price appreciation compared to that of Bitcoin. As the market continues to evolve, Ethereum's increasing dominance and the bullish signals from its options market position it as a leading contender in the cryptocurrency landscape, making it likely to outperform Bitcoin in the near future.

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Bybit X Block Scholes Option Volatility Report: November Option Volatility Report: Volatility on the Road to $100K

What the future might hold in terms of the evolution of crypto options trading and how innovations can improve market efficiency?

Options trading has revolutionized the crypto derivatives market and improved risk management liquidity. The newly introduced IBIT options have been a great addition to this transformational process and have attracted much institutional interest, while bringing crypto closer to the traditional financial market. 

In this article, we’ll examine the current state of the crypto options landscape, what the future might hold in terms of the evolution of new strategies,and how these innovations can improve market efficiency. We’ll also examine how 

 (CEXs) could converge the crypto and traditional finance (TradFi) markets.

Crypto options trading emerged as a frontier of the cryptocurrency derivatives market. Its roots date back to 2016, when the first BTC options market launched. It can be categorized into three different stages as follows.

These three stages represent some of the key developments of crypto options trading as it’s transformed from a niche product to a sophisticated financial instrument, attracting retail and institutional traders. Despite the rapid adoption of crypto options trading by key players, its trade volume and level of sophistication still lag compared to trading in traditional markets. However, this could change due to new innovations.

2024: A Milestone Year for Crypto Options Trading and Potential Market Structure Transformation

2024 has been an important year for crypto options trading. In addition to unprecedented growth and increasing institutional adoption, the launch of Bitcoin ETF options, particularly BlackRock's iShares Bitcoin Trust (IBIT), which attracted nearly $2 billion in notional exposure on its first day of trading, could be a watershed moment for crypto options trading. These crypto ETF-related options could be an effective way for TradFi and institutional investors to hedge against the risks associated with crypto’s volatility. These tools could help transform the broader crypto trading landscape and market structure, particularly in liquidity and institutional participation, as follows.

The crypto options market is expected to grow even further in 2025, based on the continuation of positive market sentiment, with new innovations in the pipeline. Some key expectations for the crypto options market in 2025 include the following:

Bybit's Innovations Lead Crypto/TradFi Market Convergence

Bybit is a key player in the convergence between crypto and TradFi markets, particularly in options trading. Its exchange has introduced innovative features that bridge the gap between these financial ecosystems, catering to both institutional and retail traders.

 also simplify collateral management and reduce cross-currency settlement complexity. This aligns with the growing trend of 

-settled derivatives in crypto markets, mirroring the cash-settled options common in traditional finance.

Bybit has expanded its options offerings beyond 

, broadening the scope of tradable assets and mirroring the diverse options available within traditional markets.

Bybit's implementation of advanced risk management tools, such as

, allows traders to analyze and hedge their positions more effectively, bringing crypto options trading closer to the level of sophistication seen in TradFi options markets. Additionally, its user-friendly interface makes options trading more accessible to retail traders, potentially expanding the market's participant base. 

These innovations contribute to the overall maturation of the crypto options market, facilitating the convergence of traditional finance and digital asset trading while addressing the unique challenges of cryptocurrency volatility and liquidity.

The rapid evolution of crypto options trading, particularly with the introduction of Bitcoin ETF options, marks a significant milestone in the cryptocurrency market's maturation. This development has substantially enhanced market efficiency, liquidity and risk management capabilities, attracting considerable institutional participation. The unprecedented trading volumes and sophisticated strategies employed in crypto options trading, such as 

 writing and synthetic long positions, signal a convergence with traditional financial markets.

Looking ahead, the crypto options market is expected to continue growing and innovating. While expectations are for BTC to reach a new all-time high in this cycle, the options market will likely see increased volume and more diverse product offerings. However, this potential growth remains subject to regulatory developments and macroeconomic factors that play a crucial role in shaping the future of crypto options trading. While the ties between crypto and TradFi are expected to grow, CEXs such as Bybit emphasize the importance of this convergence, which aligns with its vision of bridging the gap between crypto and traditional finance.

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Beyond Volatility: How Options Trading Is Paving the Way for a New Era in Cryptocurrency

As Bybit celebrates its sixth anniversary, the exchange has solidified its position as a leading player in the cryptocurrency market.

As Bybit celebrates its sixth anniversary, the exchange has solidified its position as a leading player in the cryptocurrency market. With significant growth in both its user base and variety of trading products, Bybit is not only expanding its offerings, but also enhancing its market influence. This article highlights the attached report’s key messages, focusing on user growth, spot trading, perpetual futures and options trading.

Since its inception in 2018, Bybit’s user base has experienced explosive growth, surpassing 60 million users by Q3 2024. This remarkable increase — from 20 million users in late 2023 — underscores both the platform's appeal and the growing global interest in cryptocurrency trading.

Several factors have contributed to this user growth. First, Bybit's continual innovation and its introduction of new trading products have attracted a diverse range of traders. Additionally, the platform’s user-friendly interface and robust educational resources have made it accessible to newcomers in the crypto space.

Moreover, the rising popularity of cryptocurrency, as well as favorable market conditions — such as the anticipation surrounding Bitcoin Spot ETFs — have drawn more users to the platform. The report indicates that the influx of new users has led to increased activity, further driving demand for various trading pairs.

Spot trading on Bybit has seen significant expansion, with daily volumes exceeding $10 billion by 2024. This growth is particularly notable given the turbulent market conditions that have characterized the past few years. The report highlights that spot trading volumes grew steadily, especially during bullish market phases, driven by heightened interest in altcoins alongside Bitcoin.

The number of available spot trading pairs has more than doubled from 2022 to 2024, catering to the diverse preferences of traders. Increased spot pair availability has not only attracted more users, but has also contributed to a robust trading environment in which traders can capitalize on various market opportunities.

Tellingly, the report notes the relationship between Bitcoin's price movements and spot trading volumes. As Bitcoin rallies, there’s a substantial uptick in trading activity for both Bitcoin and altcoins, indicating a capital rotation effect that’s common in cryptocurrency markets.

Perpetual futures remain one of Bybit’s most popular trading instruments, consistently outpacing spot trading volumes. During the March 2024 rally, perpetual trading volume reached nearly $70 billion, highlighting traders' preference for leveraged trading options that these contracts provide.

The appeal of perpetual futures lies in their flexibility, allowing traders to take both long and short positions while utilizing 

 to amplify potential gains. This makes perpetual futures an attractive option for traders seeking to optimize their capital efficiency.

Despite the steady growth in spot trading, perpetual futures have maintained a dominant position in the market. The report indicates that while spot trading volumes have increased, they still lag behind those of perpetual futures, reflecting a strong preference among traders for these derivative products.

Bybit’s continual enhancement of its perpetual futures offerings, including a wider range of trading pairs, has further solidified its leadership in this segment. The growth trajectory of perpetual futures is expected to continue, particularly if market conditions remain favorable.

 market, although smaller than its perpetual futures segment, is experiencing noteworthy growth. Since its launch in 2022, the options market has expanded, reflecting an increasing number of traders willing to engage with more sophisticated trading instruments.

The report reveals that Bitcoin options dominate open interest within Bybit’s options market, with a growing preference for call options over puts. This trend indicates traders’ optimism about Bitcoin’s future price movements, particularly following the recent price rallies.

Solana options, introduced more recently, are also gaining traction, showcasing the evolving landscape of cryptocurrency derivatives. The report highlights a clear upward trajectory in open interest for Solana options, driven by increasing demand for exposure to emerging cryptocurrencies.

As traders become more familiar with options trading, the market is expected to mature, providing further opportunities for innovative trading strategies and 

Bybit’s sixth anniversary marks a significant milestone in its journey as a leading cryptocurrency exchange. With a rapidly growing user base, robust spot trading activity, dominant perpetual futures volumes and burgeoning options market, Bybit is well-positioned for continued success.

These developments not only reflect Bybit’s commitment to enhancing its offerings, but also highlight the broader trends within the cryptocurrency market. As traders seek diverse and sophisticated trading instruments, Bybit’s adaptability and innovation will likely play a crucial role in shaping its future.

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Bybit’s 6th Anniversary: A Journey of Growth and Milestones Toward Becoming the No. 2 Crypto Exchange

ETH has outperformed, bolstered by SEC Chair Gary Gensler's announcement of his Jan 20, 2025 departure, and suggested by growing open interest in ETH perpetual. This positive momentum extends to several large-cap altcoins previously scrutinized by the SEC, as indicated by bullish funding rates for long positions.

ETH Open Interest Grows While BTC’s Declines

ETH is outperforming BTC following the announcement of SEC Chair Gary Gensler’s departure, as evidenced in perpetual swap markets. BTC open interest has decreased from last week's highs, while ETH contracts have increased. Additionally, ETH trade volumes constitute a larger share of daily trading as compared to much of the past six months, despite an overall dip in trade volumes this week. The gradual decline in BTC open interest, without a surge in trading activity, indicates a strategic repositioning, rather than a wave of liquidations.

BTC Option Curve Inversion Deepens as Price Retreats

The pullback in the spot BTC price from the $100K target has led to a flat ATM volatility term structure, with short-tenor options dropping below 60%. 

This trend continues the correlation between term structure inversion and BTC spot price returns observed since the U.S. election on November 5, 2024

. The decline in front-end volatility aligns with lower realized volatility levels. While demand for short-tenor options has moderated, there hasn't been a notable change in open interest for calls or puts. Instead, their growth has stalled at the week's start.

Sentiment in ETH options markets seems moderately more bullish than in BTC's during the recent decline in momentum from the post-election rally. Call options lead in both trading volumes and open interest. 

Bybit X Block Scholes Crypto Derivatives Analytics Report (Nov 27, 2024): Signal on ETH Outperformance Against BTC Surfaces on Long-Term Contracts

What does a strong BTC price mean to the broader Bitcoin ecosystem?

The conversation around the Bitcoin ecosystem has returned as the price of BTC reached another all-time high, over $90,000, for the first time in November 2024. High expectations from a pro-crypto U.S. administration, a fresh easing cycle from the Fed, strong demand for crypto ETFs and institutional adoption could all be driving forces behind BTC's strong performance.

On the other hand, the performance of the Bitcoin ecosystem projects and their related assets was mixed. The 

 of Bitcoin DeFi reached a new high, while the floor price of most ordinal inscriptions didn’t follow BTC's strong momentum.

In this article, we’ll look into what BTC record performance means to the broader Bitcoin ecosystem. The possibility of BTC's strong momentum creates tailwinds for sub-verticals within the ecosystem, and the chance of speeding up the adoption of Bitcoin scaling technologies as interest increases. 

 (DeFi) for Bitcoin could be one of the sectors that benefit from a high BTC price. Bitcoin DeFi is an emerging sector within the Bitcoin ecosystem that aims to leverage Bitcoin's security and infrastructure for DeFi applications. 

 (TVL) of Bitcoin DeFi has reached over $4 billion for the first time as the price of BTC surged to over $90,000. With BTC's price expected to rise further, overall liquidity in the Bitcoin network could increase and more BTC could be locked into DeFi protocols.

Figure 1: TVL of Bitcoin DeFi has reached $4 billion for the first time. Source: DefiLlama

 are some of the popular narratives among Bitcoin DeFi. These related projects are expected to benefit from increased interest, activity and liquidity in the Bitcoin network. For example, some BTC holders could look to generate yield from their idle holdings. BTC's increasing value might encourage some other holders to mint and use BTC-collateralized stablecoins.

The current bullish sentiment may create a positive feedback loop. Rising prices could fuel investors' optimism, driving further investment into the Bitcoin ecosystem and potentially leading to a self-sustaining growth cycle.

If the demand for Bitcoin DeFi is set to increase, the interest in Bitcoin's scaling solutions might also increase. That's because developers could take advantage of the market attention of the world’s leading crypto, as well as some of the recent technology breakthroughs under the hood, to build (

) on Bitcoin. This would especially apply to expanding Bitcoin’s 

 (L2) solutions, allowing the blockchain to handle transactions more efficiently. On top of that, building sophisticated 

Figure 2: TVL of Stacks — a major Bitcoin L2 — recovering from Q2’s decline. Source: DefiLlama

, a Bitcoin L2 that provides smart contract capabilities for the Bitcoin blockchain, might see increased interest. Data from DeFillama shows that Stacks' TVL has been gradually recovering from Q2's decline, and

, its native token, has posted a 20% YTD gain.

In addition, a strong BTC price could benefit BTC-related infrastructure. Projects such as 

, a Bitcoin-based noncustodial wallet that allows users to store and manage assets on Bitcoin, and Nomic, which bridges Bitcoin to the 

 ecosystem, could see growth due to the increased demand for interoperability, allowing Bitcoin to be used in DeFi ecosystems beyond its native network.

Ordinal Inscriptions Struggle to Regain Traction

 were some of the important narratives in the Bitcoin ecosystem in 2023. However, Ordinal inscriptions weren’t immune as the market trend turned sour in Q2 2024. As the price of BTC has rebounded, some of the ordinal inscriptions seem to have struggled to regain traction. Figure 4 shows the floor price of Runestone, which is the third-largest market cap ordinal inscription collection on CoinGecko. It hasn’t seemed able to follow BTC’s recent strong momentum, at least not yet. Although some other collections may have shown some traction recently, its floor price is still quite far from its previous peak.

Figure 3: Total market cap of NFTs on Bitcoin. Source: CoinGecko

Figure 4: Floor price of Runestone over time. Source: CoinGecko

BRC-20 tokens seem to be in a similar situation. For example, 

 have a $1.3 billion combined market cap, and take up over 80% of the total BRC-20 token market cap. They’ve been struggling to follow BTC's uptrend and largely remain in the same trading range that they’ve been in for months, notwithstanding some recent short-term rebound.

Philosophical Difference Could be a Challenge

The future development of the BTC ecosystem could still face multiple challenges — despite all the innovations that have been pushing the boundaries of the oldest blockchain — and community division is a major challenge.

There's still a philosophical debate within the Bitcoin community about whether Ordinal inscriptions and BRC-20 tokens align with Bitcoin's original purpose. While Bitcoin's 

 (or "digital gold") narrative is widely accepted in the community — and has even begun to win buy-in from the mainstream — Ordinal inscriptions and BRC-20 tokens may often be seen as more risky and speculative by nature, especially if they don't offer significant advantages. This contention could pose a challenge for both Ordinal inscriptions and the BRC-20 standard, at least from an investment perspective.

Suppose the market perceives Ordinal inscriptions and BRC-20 tokens as less useful or integrated into financial ecosystems such as BTC. In that case, their value may not be fully realized by the market, and their liquidity might also not be as high as for BTC — meaning price movements could be more volatile and less directly correlated with BTC's price. In that scenario, even a skyrocketing BTC price may not be able to directly benefit the Ordinal inscription space and BRC-20 tokens.

On the other hand, Bitcoin DeFi is painting a relatively rosier picture. Since Ethereum-based DeFi has been around for a long time, the concept is easy to understand and is being tested in the market. Extending that into the Bitcoin blockchain thus seems more digestible. Besides, the demand for staking, restaking, native yield and BTC-backed stablecoins has been increasing in proportion to the price of Bitcoin. At the same time, recent tech innovations seem to cater more to DeFi activities on Bitcoin, rather than improving the user experience of Ordinal inscriptions and BRC-20 tokens. 

The impact of Bitcoin's record-high prices extends far beyond mere numbers on charts. As we've examined throughout this analysis, a rising BTC price could create a cascading effect across the entire Bitcoin ecosystem. However, it's crucial to recognize that sustainable ecosystem growth requires more than just price appreciation. 

While record-high prices certainly attract attention and capital, they must be accompanied by fundamental improvements in scalability, accessibility and user experience. The challenge for the Bitcoin ecosystem will be to harness this increasing momentum to build lasting infrastructure and develop practical applications that extend far beyond speculative trading. 

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Will the Bitcoin Ecosystem Benefit From a Record High BTC Price?

Nov 25, 2024: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Weekly Highlight — Trump's Planned Crypto Advisory Council

President-elect Donald Trump has pledged to establish a crypto-friendly administration, which includes forming a new advisory council for the cryptocurrency industry. Major companies like Ripple, Kraken and Circle are vying for positions on this council to influence U.S. digital asset policy.

The council is expected to be based within the White House, likely under the National Economic Council, and will coordinate policies related to cryptocurrencies, advise Congress and help create a national Bitcoin reserve. Industry leaders, including executives from Coinbase and Circle, have expressed interest in joining.

Trump’s transition team is also considering appointing a "crypto tsar" to lead the council. Former CFTC officials, such as Heath Tarbert and Brian Quintenz, are advising on crypto policy as the administration seeks to roll back Biden-era enforcement actions against crypto companies.

While excitement over a pro-crypto administration has contributed to Bitcoin's surge toward $100,000, some consumer groups have raised concerns about the industry shaping its own regulations. 

Weekly Crypto Highlight — Bitcoin Tests $100,000 as ETF Flows Intensify

U.S. Spot Bitcoin exchange-traded funds (ETFs) have achieved a significant milestone, accumulating over $30 billion in total net inflows since their inception in January 2024. This surge in investment reflects a growing interest in Bitcoin, as well as a favorable market environment.

The rise in net inflows and trading volume can be attributed to heightened bullish sentiment in the market, particularly following the re-election of former president Donald Trump. His return to the political forefront has sparked optimism among investors, contributing to increased confidence in cryptocurrency investments.

As a result of this influx of capital, the total net asset value of these Bitcoin ETFs has exceeded the $100 billion mark as of Wednesday, Nov 20, 2024. This achievement underscores the growing acceptance of cryptocurrencies in mainstream finance, and highlights the potential for continued growth in this sector. The strong performance of these funds signals a robust demand for Bitcoin, and could pave the way for further developments in cryptocurrency investment.

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