UPDATE: A new report from Bybit, the world’s second-largest cryptocurrency exchange, reveals that crypto derivatives sentiment remains weak even after the Federal Reserve’s recent decision to cut interest rates by 25 basis points during its last meeting of the year. This analysis, conducted in collaboration with Block Scholes, highlights ongoing caution in the crypto markets despite optimistic economic forecasts.
Just announced, the report emphasizes that traders are showing limited enthusiasm to engage with leveraged positions following the Fed’s policy shift. As crypto enthusiasts were hoping for a late-year rally, the findings suggest they may be in for disappointment.
Key highlights from the report show that perpetual swap contracts are currently experiencing open interest levels significantly lower than those seen prior to October 10. Additionally, funding rates indicate that retail traders have been hesitant to re-enter the market. The report also notes a bearish trend in options markets, with both Bitcoin (BTC) and Ethereum (ETH) showing volatility smiles that price in nearly 5 percent premiums for out-of-the-money puts compared to calls.
The report underscores the broader implications of the Fed’s economic outlook. Han Tan, Chief Market Analyst at Bybit Learn, stated, “Crypto bulls still have their work cut out to get any upside momentum going, considering that digital assets could only muster a tepid response to the final FOMC meeting of 2025, in stark contrast to global equities that surged to new record highs.”
Despite the Fed’s positive assessment, BTC’s spot price remains 28 percent below its all-time high, reflecting the cautious sentiment among traders. The options market continues to indicate a strong preference for downside protection as traders await more compelling catalysts for a market rebound.
As the crypto market grapples with these developments, the window for a so-called “Santa rally” appears to be narrowing, as highlighted by the subdued activity across the derivatives landscape. Analysts warn that without robust catalysts, the prospects for a year-end resurgence remain dim.
With the Fed’s policy outlook framing market reactions, analysts urge traders to closely monitor the upcoming U.S. jobs report and inflation data releases. The outlook for the crypto market remains tempered, with traders exhibiting reluctance to leverage positions amid ongoing uncertainty.
For those interested in a deeper dive into the data, the full report is available for download.
As the situation develops, the cryptocurrency community is encouraged to stay informed and prepared for potential shifts in market dynamics.
