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

Options

Risk reversal refers to the active hedging strategy of using options contracts to protect a long or short position against unexpected movements. Read more here.

When trading an asset such as cryptocurrencies, accounting for volatility is a must due to the potentially huge swings in prices that can occur at a moment's notice. That's where proper 

 are crucial. They minimize your exposure as a trader, and help you make more small calculated bets without blowing up your account. 

One such example of portfolio hedging is risk reversal options, an investment strategy that can be used for both long and short positions. Keen to find out how? We’ll uncover all you need to know about risk reversal strategies and the potential benefits you can reap from employing such a strategy.

A risk reversal options strategy has two parts. If a trader has an existing long position, a short risk reversal strategy can be executed in which the trader writes a call contract and buys a put contract. This effectively puts a limit on the potential upside while accounting for possible downside on the existing long underlying position.

Conversely, if a trader has an existing short position, a long risk reversal strategy can be used. This is when a trader writes a put contract and buys a call contract. In essence, this puts a cap on potential profits while taking into account any potential volatility for the short position. 

Although such an options hedging strategy is complex, due to its multi-legged nature, it can be especially useful in crypto markets if traders are expecting some form of explosive upward or downward movement for their crypto portfolio. That’s why it’s essential for those who understand the nature of crypto options to try their hand at executing this hedging strategy, instead of simply holding and hoping the sentiment changes in their favor.

Advantages of Using a Risk Reversal Options Strategy

As a hedging strategy that helps traders to manage their portfolios and limit risks, this crypto options strategy has numerous advantages, such as the ones listed below.

Thanks to the combination of bought and written options, traders can control their exposure to the market, based on market sentiment, without the need to offload their existing underlying positions. From accounting for near-term catalysts to collecting additional premiums, traders can tweak their risk reversal strategy to fit their risk appetite when it comes to overall exposure. For instance, if a trader wants to hedge against a potential drop in price, they can select an option that pays out if the price drops below a certain level. 

The other noteworthy benefit of risk reversal options strategies is that traders can use them to speculate on future market prices without risking excessive capital. This allows traders to benefit from the expected directional movement of an asset without having to put up additional capital or close their existing underlying position. 

Disadvantages of Using a Risk Reversal Options Strategy

The act of executing a risk reversal options strategy for your crypto portfolio also comes with its own set of risks and downsides, such as the following.

One disadvantage of using risk reversal options strategies is that they can be complicated to understand and execute, making it difficult for novice traders to take advantage of opportunities. 

Whether writing options at the right strike price to derive maximum value, or buying options at a far off enough strike to ensure that the position is sufficiently hedged, the losses incurred can be greater in certain scenarios if traders don’t research the potential upside and downside when executing such a complex derivatives strategy.

Costs of Running Multi-Legged Crypto Options Strategies

There can also be higher transaction costs associated with using this type of strategy, due to the multi-legged options buying and writing involved. As there’s a need for more than one leg of the options strategy open for the position to be considered hedged, certain costs are incurred. On top of this, there will also be opportunity costs incurred, since potential profits will be forgone if the price goes in the opposite direction from that for which the position was meant to be hedged.

How to Use the Risk Reversal Options Strategy

Now that you’re fully aware of the benefits and risks associated with utilizing long and short risk reversal options strategies, let’s take a look at the specifics of executing such a derivatives hedging strategy. 

For example, let's go with Bitcoin, having a reference price of $26,000. If you intend to long BTC, but want to hedge against an upcoming bearish catalyst, you’ll want to execute a short risk reversal options strategy. In this case, we’ll be looking at writing a call contract for the first leg of the short risk reversal options strategy for the long BTC position. While actual strike prices may differ, depending on your personal risk appetite, a conservative estimate would be writing a call with about a 0.3 delta. In this case, taking a look at the BTC options chain with a Jul 28, 2023 expiration date, writing the 28000c call contract would be suitable in this scenario.

For the long put leg of the short risk reversal options strategy, if you’re expecting a 5% correction in the coming weeks, BTC traders can play the runup to this by purchasing an 

 (OTM) put contract. In this case, traders can consider the 25000p with a Jul 28, 2023 expiration date. In the short run, this can result in a profit — if BTC’s price moves exactly as expected — if the 28000c contract expires out-of-the-money, while the 25000p contract expires in-the-money (ITM).

Based on the example above, the sale of the call option will provide an immediate premium that can be used to offset part of the premium cost incurred when purchasing the put option. Having these two positions in place mitigates any potential losses on the downside if the underlying asset drops below the current price of BTC. However, if the stock rises above the call strike price, then there’s still potential for gains, as the amount gained from selling BTC at the call’s strike price will exceed those from purchasing the out-of-the-money put contract.

As for the risks of this crypto options strategy, one key consideration for BTC options traders is that there will always be an opportunity cost associated with taking on this kind of hedging position. If Bitcoin gains momentum and rallies, then the existing long position will be sold at the aforementioned $28,000 strike price because of the written call contract. This means that the trader will miss out on any potential gains from a further increase in the price of Bitcoin.

Is the Risk Reversal Options Strategy Worth Trying?

Based on the pros and cons listed above, it’s clear that the risk reversal options strategy can be beneficial for both beginning and experienced traders. 

For beginners, it’s a great way to get started with trading BTC and ETH options without risking too much capital. While there is a barrier to entry when it comes to executing the strategy, this can be compensated for with 

 to familiarize oneself with the option strategy. 

By writing OTM contracts and purchasing ITM contracts, traders can limit their losses while preserving potential gains from an increase in the price of their preferred cryptocurrency.

Moreover, experienced traders may consider this specific crypto options strategy when trying to protect their existing positions and balance out their portfolio, minimizing the negative impacts of a volatile market. That said, beginners and those unfamiliar with options should be aware of the risks involved, and exercise caution when executing this options strategy.

All in all, hedging a crypto portfolio with derivatives has the potential to achieve capital preservation, or even appreciation, in a volatile cryptocurrency market. By writing out-of-the-money contracts and purchasing in-the-money contracts with long and short risk reversal option strategies, respectively, traders can reduce their risk while retaining the chance to benefit from potential price increases. 

At worst, the underlying position is sold for a profit, thanks to the OTM contract being exercised. And at best, the opposing position pays off — and the hedge provides a crypto trader with a tidy profit, even as they hold onto their underlying position.

Risk Reversal: An Options Strategy for Low-Risk Profiles

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards