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.

December's end-of-year options expiration brought an unexpected drop as realized volatility fell to the lowest levels of the month. Perpetual swap open interest remained stable, indicating these markets weren't heavily used for hedging against expired options, likely contributing to the muted volatility. 

While most expired open interest in Bitcoin (BTC) and Ethereum (ETH) hasn't been reinvested, the balance of calls and puts remains consistent. Notably, ETH options are pricing in higher implied volatility as compared to BTC, particularly for shorter expirations, leading to a flat term structure for ETH, while BTC is offering cheaper options exposure.

In the perpetual markets, low volatility and minimal spot movements have led funding rates for nearly all tokens to mirror broader market sentiment throughout the holiday season. On the options side, BTC's term structure is noticeably lower and steeper than ETH's, with realized volatility now dipping below implied volatility levels, highlighting an intriguing shift in market dynamics.

Please check out the report’s highlights.

Open Interest Solid Amid Year-End Options Expiration

Although open interest for both BTC and ETH perpetual swaps hasn’t returned to early December 2024 highs, it remained robust throughout the significant end-of-year options expiration event. This suggests that these markets weren’t heavily utilized to 

 of the expiring options contracts, likely contributing to the lack of volatility observed during this period. Instead, trading volumes have dipped noticeably during the winter holiday season, coinciding with a collapse in realized volatility back to December 2024’s lowest levels.

BTC Option Curve Remains Steep During Call-Put Parity

The expiration of December's end-of-year options didn’t trigger the anticipated surge in volatility; instead, realized volatility has plummeted to the lower end of its recent range. The implied volatility term structure remains steep compared to both its recent behavior and ETH's, with longer-dated implied volatility around 57%, and 1-week at-the-money options trading about five points lower. Much of the expired open interest hasn’t yet been rolled into new positions, maintaining a neutral balance between puts and calls. Consequently, BTC's options market positioning is relatively neutral, lacking the leverage it had at the start of December 2024.

Huge ETH Option Expiring Doesn’t Cause Volatility

A late December spike in realized volatility didn’t carry into the new year, with ETH’s spot price currently exhibiting volatility below that of short-tenor implied volatility. Interestingly, the implied volatility term structure has undergone a steepening and re-flattening over the past week, contrasting with BTC’s slightly steeper profile. This suggests that ETH’s options market is anticipating higher short-term volatility in spot price movements. 

Despite the significant expiration of options open interest at the end of December 2024, which didn’t lead to a rollover into later expirations, call options continue to dominate the market and have increased at the start of 2025.

Advanced

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Bybit X Block Scholes Crypto Derivatives Analytics Report (Jan 2, 2025): BTC Options Continue to See Call-Put Parity, With Lower Short-Term Volatility Expected

Dive into FLock, a decentralized platform that revolutionizes the way AI models are developed, trained and deployed.

Artificial intelligence (AI) is poised to transform countless industries, but its development often raises questions about privacy, control and inclusivity. 

 is a unique decentralized platform that democratizes AI training, fine-tuning and inferencing. With its blockchain-powered infrastructure, FLock ensures transparency, security and community-driven decision-making, paving the way for AI models that align with established societal values. 

In this article, we’ll explore how FLock decentralizes AI training, its key features and its potential impact on developers, communities and users.

 platform that revolutionizes the way AI models are developed, trained and deployed. By leveraging blockchain technology and a novel approach called 

, FLock addresses critical issues in AI development, such as centralized control, lack of transparency and privacy concerns.

At its core, FLock’s mission is to democratize AI by enabling communities to participate directly in the creation and refinement of AI models. Through federated learning, FLock trains AI models across multiple decentralized devices or servers. This method ensures that data remains local, eliminating the need for raw data exchange while still enabling robust model training. By decentralizing the training process, FLock not only protects individual privacy, but also fosters a more inclusive ecosystem in which diverse contributors can collaborate.

What sets FLock apart is its integration of 

. This ensures that all contributions — whether data, compute power or feedback — are transparently recorded and fairly rewarded. Blockchain tech’s immutable ledger enhances trust among participants and safeguards the process against manipulation. Additionally, the platform’s on-chain incentive mechanisms encourage participation from a wide range of contributors, ensuring that rewards are distributed equitably.

Ultimately, FLock empowers communities to develop bespoke AI models tailored to their specific needs. By decentralizing the process and prioritizing transparency and collaboration, FLock breaks the monopoly of large corporations, creating an AI ecosystem that aligns with public ethics and societal values.

, an Oxford alumnus with a robust background in AI and blockchain technology. Sun, who serves as FLock's CEO, has an impressive career trajectory, having worked as the Director of AI for the Royal Bank of Canada and as an AI Research Fellow at Imperial College London. His vision for FLock stems from a deep understanding of both the technical and ethical challenges of AI development.

The founding team also includes other Oxford alumni, boasting over a decade of combined experience in AI research and the cryptocurrency industry. This team brings a collective blend of academic excellence and practical expertise that positions FLock to lead the decentralized AI movement.

FLock has successfully raised $11 million in funding across two rounds, reflecting strong investor confidence in its vision. In May 2024, FLock secured a $6 million seed round co-led by Lightspeed Faction and Tagus Capital, with additional backing from Digital Currency Group (DCG), Volt Capital, OKX Ventures and Inception Capital.

Later, in December 2024, FLock announced a $3 million successful funding round led by DCG and joined by prominent names like Animoca Brands, Fenbushi Capital, GnosisVC and GSR. These investments are being channelled into enhancing the platform’s testnet and federated learning client, accelerating FLock’s mission of enabling secure, collaborative AI development.

With this funding and over 1,500 nodes contributing from platforms like Numerai and Kaggle, FLock is rapidly scaling its impact on decentralized AI training.

FLock AI revolutionizes AI development through its decentralized training framework. This approach allows participants to contribute to AI model training without ever sharing their personal data. Instead, models are trained locally across devices using federated learning, which ensures that data remains with its owners while still enhancing the accuracy of the model overall. 

FLock’s reward system is designed to incentivize active participation. Contributors who provide data, computational power and/or feedback are compensated with FLOCK tokens, ensuring a fair distribution of rewards. 

FLock empowers its community through a robust governance framework. Decisions regarding AI model development, deployment and ethical considerations are driven by the community, ensuring alignment with established societal values. Through blockchain-based voting mechanisms, contributors can influence the direction of AI projects, fostering transparency and public accountability. 

FLock’s modular architecture allows contributors to participate in specific aspects of AI model development. Whether providing raw data or computational power or even refining algorithms, the platform enables a collaborative and scalable development process. 

At the core of FLock’s philosophy is its commitment to privacy and security. By leveraging blockchain technology, the platform ensures that no single entity controls the AI development process. Data remains local and protected by cryptographic measures, while the immutability of blockchain guarantees transparency in every transaction and model update. 

 begins with a blockchain and an AI layer.

The blockchain layer underpins FLock’s incentivization and security mechanisms.

The AI layer facilitates model training, refinement and deployment, leveraging both centralized and federated approaches.

Let’s have a look at the supply and demand for the FLOCK token.

FLock adopts a 1:2 ratio model between team/investors (33.3%) and community (66.7%), prioritizing community-driven growth and ecosystem expansion. The majority of tokens are allocated to incentivize user participation and long-term ecosystem success.

FLock aims to improve the future of AI development by decentralizing the training process and ensuring transparency, privacy and inclusivity. By leveraging blockchain and federated learning, FLock empowers communities to contribute to AI creation without compromising on privacy. Its innovative reward system and community-driven governance foster a fair and collaborative ecosystem. 

With significant backing and a growing network of contributors, FLock is positioning itself as a leader in decentralized AI, offering a more ethical and secure alternative to traditional AI development models. As it continues to scale, FLock is set to transform the way AI models are built and deployed.

 — and earn a share of a 10 million FLOCK prize pool. For more details, visit 

Intermediate

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FLock AI: Decentralized AI Training

In this tutorial, we’ll explore how you can complete a series of tasks in Network3 for Bybit Web3 Airdrop Arcade.

Task 1: Register for a Network3 Account and Connect Your Bybit Wallet 

: Navigate to the campaign page and click on the 

task. Click on the task, and Galxe will ask to redirect you to the Network3 register page.

: Register for a Network3 account using your email address. You may indicate a 

Task 2: Download the Network3 App and Run a Node for One Hour

 and choose your operating system to download the Network3 app.

 or powerbutton, depending upon which operating system you’re using. For ease of reference, we’ve used macOS and iOS as examples below.

: Keep running the node until the timer reaches 

Beginner

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How to Complete Network3 Tasks for Bybit Web3 Airdrop Arcade

Bybit launched the Bybit Merch Creative Challenge for university students worldwide, offering a $50,000 USDT prize pool.

The S&P 500 dropped 0.22% on Thursday, its fifth straight decline, with investors eyeing Friday’s economic updates. Coindesk Indices, an index measuring broader cryptocurrency market performance was up by 2.03%, with Bitcoin and Ether rising by 2.79% and 2.70%, respectively in the past 24 hours.

Today's top performer is XRP, which surged 1.9% following a rise in price driven by increased open interest and positive market sentiment.

Ripple (XRP), launched in August 2012, is a blockchain technology company focused on improving international payments with its cryptocurrency, XRP. XRP price surged due to increased open interest, a major XRP transfer, and market sentiment linked to Trump's inauguration. Bullish momentum is supported by high short liquidations, with key resistance levels to watch for further price movement.

Check Out the Latest Prices, Charts, and Data of 

 for university students worldwide, offering a $50,000 USDT prize pool. Participants can design exclusive Bybit merchandise, with submissions open until Jan. 15, 2025. Winners will be announced on Feb. 1, 2025, across four prize categories.

Yesterday, Bitcoin Spot ETFs recorded a total inflow of $84.8M, driven by $107.9M from non-GBTC funds, partially offset by a $23.1M outflow from GBTC.

, offering an airdrop for participants who complete tasks like swapping and bridging using the Mango wallet. Points earned through tasks determine airdrop rewards. Join via the Mango wallet and follow steps on the testnet dashboard.

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Bybit Launches $50,000 Merch Design Challenge for University Students Worldwide

Bybit Learn

Investing

Bitcoin

GBTC is the world's largest Bitcoin fund and the first-ever publicly traded trust that has a digital currency as its underlying value.

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Grayscale® Bitcoin Trust (GBTC), an investment trust that’s traded publicly on the stock market, is a great option for individuals, companies and institutions unfamiliar with the crypto market who want to invest in Bitcoin without directly managing it.

But is it a good investment option for everyone else? Are you missing out if you haven’t invested in it yet? Are there drawbacks that might deter some people from buying Grayscale?

In this article, we’ll answer these questions and more.

) is the world's largest Bitcoin fund. It’s also the first-ever publicly traded trust that has a digital currency as its underlying value. If you don’t know what that is, here’s a quick rundown.

Trusts and funds on public stock exchanges have an underlying asset that dictates their value. These assets are mostly stocks in publicly traded companies. The price of the trust or fund fluctuates based on the underlying 

 (NAV), which is affected by the asset’s demand. An investor can buy a portion of the asset by purchasing shares in the fund.

Since GBTC is a cryptocurrency trust, you can 

 through your brokerage account. In doing so, you indirectly buy Bitcoin — avoiding the hassle of purchasing BTC through a 

. This means that you’re relying on Grayscale to buy and hold Bitcoin for you as a third party.

So the actual BTC is stored in the Grayscale institutional trust, and its retail index is traded on either the open or over-the-counter market. GBTC is similar to a crypto exchange-traded fund (

), as it pools investors’ funds to invest in Bitcoin and charges investors a management fee for investing in the fund.

How Does the GBTC Investment Vehicle Compare to a Bitcoin ETF?

, is a competitor of GBTC. That’s because ETFs track the market data or value of the underlying asset much more closely than a trust. Hence, the market price per Bitcoin ETF share is relatively close to the actual value of BTC.

But that’s not the case with shares of GTBC, because the trust charges an annual 

, and sometimes also a premium. That significantly increases the price of a GBTC share as compared to the market price of BTC while spot buying, or while buying shares of a Bitcoin ETF.

Currently, the crypto investment landscape is predominantly occupied by Bitcoin futures ETFs. These financial instruments allow investors to speculate on the future price of Bitcoin, but they don't necessarily offer the most accurate reflection of the asset's real-time market value. In contrast, GBTC has been proactive in seeking regulatory approval to transition into a 

 — a financial product that could revolutionize the way investors interact with Bitcoin.

Spot Bitcoin ETFs are designed to track the actual, real-time price of Bitcoin, providing a more immediate and accurate representation of the cryptocurrency's market value. Unlike 

, which are subject to the complexities of futures contracts and can deviate from the spot price due to factors like 

, spot ETFs aim to offer a one-to-one tracking of the underlying asset. This makes them potentially more reliable and straightforward for both retail and institutional investors.

Grayscale Bitcoin Trust gathers money, usually U.S. dollars (USD), from institutional investors and uses that to buy BTC directly. These BTC are stored in the Grayscale fund, which essentially makes the Grayscale institution — rather than its investors — the actual 

. You can then buy shares of GBTC and indirectly own BTC.

Ever since Grayscale became a publicly traded fund in 2015, various investors have poured a lot of cash into GBTC by buying Grayscale stocks during bull 

. Grayscale has used that capital to buy more and more BTC. Now, it’s accumulated over 643,572 bitcoins, which is 

 as of the time of this writing (Aug 31, 2023).

To put that number into perspective, Tesla holds approximately 10,725 BTC.

What Are Premiums and Discounts on GBTC Shares?

When you buy or sell GBTC shares, the trust doesn’t immediately buy or sell BTC with your investment. That’s where the concepts of premium and discount come into play, which are essential to learn about if you want to understand how GBTC works.

Suppose the Grayscale trust has about 500,000 BTC, which are all bought by shareholders. Then five investors come in, and each buys 1,000 BTC worth of GBTC shares.

Those purchases will raise the overall value of the trust by increasing the number of BTC held by GBTC investors as compared to the number of bitcoins owned by Grayscale as an institution. That’s because GBTC doesn’t immediately use the new investment to buy 5,000 more BTC.

This means that there’s a greater demand for GBTC shares than the supply of BTC. In such a case, the trust will add a premium to BTC’s value. Anyone who wants to buy GBTC shares will then have to pay that premium on top of the share value.

Similarly, if a bunch of investors sell their GBTC shares, the new investors will get a discount. This fluctuation means that you have to buy BTC at a different price than what you’ll get by buying directly from exchanges. That’s why GBTC share prices aren’t the same as the actual value of BTC.

Finally, you can only buy or sell GBTC shares during the opening hours of the stock market, unlike 

 buying and selling, which you can do at any time.

Grayscale’s Court Battle Against the SEC

Grayscale's legal battle with the U.S. Securities and Exchange Commission (SEC) began when the regulatory body rejected Grayscale's application to convert its GBTC into a Bitcoin spot ETF. The SEC's primary concern was the potential for market manipulation, a stance that Grayscale vehemently opposed. Unlike other asset managers who also faced rejection, Grayscale took the bold step of suing the SEC, arguing that the regulatory requirements for Bitcoin futures ETFs should similarly apply to Bitcoin spot ETFs.

On Aug 29, 2023, the U.S. Court of Appeals for the District of Columbia Circuit 

 in favor of Grayscale. The court found the SEC's decision to be "arbitrary and capricious," stating that the regulatory body failed to provide a sufficient explanation for its denial. This ruling effectively vacated the SEC's initial denial order and set a new precedent in the cryptocurrency investment landscape.

Following the court's decision, there was a notable uptick in trading activity surrounding GBTC, as investors anticipated a narrowing discount to Bitcoin's spot price. First, the price of GBTC shares increased from $17.58 to a high of $20.56, the highest since BTC reached $31,000 in the middle of July 2023. This 17% increment to its share price has narrowed its 

Following this, Bitcoin’s price surged from $25,960 to a high of $27,974. The impact extended beyond just Bitcoin, as the ruling also had a positive effect on the broader cryptocurrency market, where altcoins such as 

GBTC's recent legal victories against the SEC have not only increased the likelihood of its own conversion into a Bitcoin spot ETF, but have also paved the way for other Bitcoin spot ETFs to gain regulatory approval. This could mark a significant shift in the cryptocurrency investment ecosystem, offering a more precise and potentially less volatile investment vehicle for those looking to gain exposure to Bitcoin.

Pros and Cons of Grayscale Bitcoin Trust (GBTC)

To help you decide whether or not to invest in the Grayscale Bitcoin Trust, let’s look at its pros and cons.

Some advantages of buying GBTC stocks over owning Bitcoin directly include:

Crypto exchanges and wallets are vulnerable to 

. GTBC charges a management fee for keeping their BTC secure in cold storage, which is safe from hacks.

2. Regular Audits of the Bitcoin Investment Trust

 with the securities and exchange commission (SEC) to prove that it has the BTC that investors have paid for. That’s an advantage over crypto exchanges, which have the potential to scam people. An example of one such scam is the 

Investors can get tax breaks when they buy GBTC shares through 

, such as a 401(k) or an IRA. It’s also easier for investors to file taxes for publicly traded stocks of a trust that’s approved by the SEC.

Some drawbacks of owning GBTC stock are as follows:

GBTC charges a 2% annual fee. On top of that, you have to pay a premium to buy shares when demand is high. It’s not a good fit for smaller investors, because you need a minimum investment of $50,000 to buy into Grayscale Bitcoin Trust.

You can never redeem your shares for actual BTC because the Grayscale trust owns the private keys to the BTC in your shares.

The value of a GBTC share hasn’t been growing at the same rate as its underlying asset. Even if you don’t have to pay a premium, you still won’t earn as much profit by buying shares as you will by owning Bitcoin directly. From 2020 to 2021, GBTC’s share price 

 in value while BTC surged by nearly 340%.

 (PoR) with its customers due to security concerns, despite the global panic over the 

. This refusal has sparked public furor over the company's future.

Is Grayscale Bitcoin Trust a Good Investment?

GBTC may not be a good investment option because the value of GBTC shares doesn’t accurately match the value of Bitcoin. Prior to its win against the SEC, GBTC shares were trading at a record-low 45.08% discount to Bitcoin’s net asset value 

. Now that Grayscale has won its court battle, GBTC shares are currently trading at a discount of 19.51% (as of Aug 31, 2023). While the discount has narrowed significantly, it still doesn’t change the fact that if you purchase GBTC shares today, you’ll get fewer BTC than you would through spot buying for the same amount in USD. 

Investing in GBTC doesn’t give you voting rights on protocols, because you don’t own the 

to the BTC in your shares. Also, transactions occurring on the trust are censored by government agencies — which defeats the original purpose of a decentralized digital currency.

Perhaps in the future, if the shares start trading at a premium again, then Grayscale will be a good option for accredited investors who can purchase GBTC shares at the NAV price.

While Grayscale's recent legal victory against the SEC has been a game changer, it's essential to consider the broader context when evaluating GBTC as an investment vehicle. Historically, GBTC has been a go-to option primarily for affluent investors, given its premium pricing and unique structure. Moreover, the trust has been under scrutiny for its lack of transparency, particularly its unwillingness to disclose proof of reserves. This has raised legitimate concerns about the trust's overall credibility and risk profile.

The court ruling has certainly bolstered GBTC's prospects of becoming a Bitcoin spot ETF, but it doesn't entirely mitigate the existing criticisms and risks associated with the Grayscale trust. For retail investors, the question then becomes whether the potential benefits of a Bitcoin spot ETF outweigh the existing concerns. When looking at the volatility within the cryptocurrency market, coupled with GBTC's opaque practices, some may argue that direct ownership of Bitcoin could be a more straightforward and potentially safer alternative.

Volatility is unavoidable, whether you’re buying BTC directly or on the open market through GBTC. Whenever lawmakers release new rules about regulating crypto or deny a 

In addition, since you don’t own the BTC in your GBTC shares, you can’t use it. If you want to actually use Bitcoin and save on management fees, then you’re better off 

While Grayscale’s recent legal win has opened new doors for its Bitcoin Trust, investors must weigh the inherent risks and criticisms against the potential rewards. The court ruling is a significant milestone, but it doesn't serve as a blanket endorsement of GBTC as an investment option. Retail investors need to exercise 

 and consider multiple avenues for cryptocurrency exposure, including the direct ownership of Bitcoin.

Grayscale Bitcoin Trust (GBTC): All You Need to Know

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