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

Crypto price movements remain heavily influenced by US president Trump’s policies. Recently, several SEC cases against crypto firms were dropped, which is positive for the industry. This was followed by Trump’s announcement to include BTC, ETH, XRP, SOL and ADA in a US strategic crypto reserve. However, ongoing bearish sentiment in risk assets, highlighted by a decline of over 5% in the S&P 500 since its February all-time high, has negatively impacted crypto. 

Consequently, BTC and ETH have experienced heightened volatility, resulting in an inversion of their at-the-money implied volatility term structures, with strong demand for short-term protective puts.

Please check out the report’s highlights.

President Trump’s announcement on Mar 2, 2025 regarding a US crypto reserve to include BTC, ETH, SOL, XRP and ADA led to a sharp rally in their spot prices. However, funding rates for these tokens have remained subdued, compared to previous highs seen before Trump’s inauguration on Jan 20, 2025. Over the past week, long positions have paid a consistently positive rate across all coins, indicating a lack of strong short demand and potentially robust demand for long positions.

The rally in spot prices following Trump’s announcement of a US crypto strategic reserve to include ETH quickly reversed, as his ongoing tariff pledges contributed to bearish sentiment in risk assets. This volatility has pushed realized volatility above options-implied levels to monthly highs, leading to increased demand for short-term options. The term structure of volatility has inverted, with short-term volatility skewing toward puts as traders seek protection against potential downside.

Open interest in Solana (SOL) options declined at the end of February, with over $5M in calls and more than $3M in puts expiring, most of which weren’t rolled into new positions. Despite SOL trading 44% below its January all-time high, the majority of new positions have been in calls. However, this new positioning is disappointingly weak, given SOL's inclusion in the list of tokens for a crypto strategic reserve announced by Trump alongside BTC, ETH, XRP and ADA.

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Bybit X Block Scholes crypto derivatives analytics report (Mar 7, 2025): Investors seek protection as strategic reserve news rattles market

Exchange-traded funds (ETFs) linked to cryptocurrencies have seen notable activity, particularly in response to the recent market downturn. 

Market volatility and geopolitical influences

The cryptocurrency market has been marked by extreme price fluctuations in recent weeks, primarily influenced by political events and economic conditions. A notable catalyst has been US president Donald Trump’s aggressive financial policies, including his unexpected announcement of a US crypto strategic reserve. Initially, this announcement led to a surge in prices; however, the market quickly reversed, raising doubts about the effectiveness of government intervention in stabilizing the crypto sector.

Bitcoin, the top cryptocurrency, experienced a significant drop of 28.3% from its all-time high of $109,115, closing February at $78,226. This decline coincided with a heated exchange between Trump and Ukrainian President Zelensky, which unsettled the crypto community amid discussions about potential tariffs and geopolitical stability. The broader crypto market lost over $640 billion in just 25 days, showcasing a direct correlation between traditional stock market movements and cryptocurrency trends.

Investor behavior has been characterized by emotional responses, including fear of missing out (FOMO) and fear, uncertainty and doubt (FUD). These reactions have often led to price movements that contradict prevailing predictions. For example, during Bitcoin’s price decline, many retail traders panicked and sold off their holdings, only to witness a rebound shortly after. Conversely, price surges driven by FOMO frequently result in subsequent corrections, allowing larger investors (or 

Social media trends indicate a shift in trader sentiment, with discussions around high price targets for Bitcoin suggesting a market top, while talk of lower price expectations may signal a bottom. Recent data reveals a decline in discussions related to speculative investments, indicating a growing caution among retail investors. This shift toward stablecoins and Layer 1 tokens reflects a healthy level of fear that could potentially set the stage for bullish momentum in the future.

The role of ETFs and institutional interest

 (ETFs) linked to cryptocurrencies have seen notable activity, particularly in response to the recent market downturn. Significant outflows from crypto-backed ETFs occurred as investors reacted to declining asset values, resulting in heightened trading volumes. The interplay between ETF movements and underlying crypto assets continues to be crucial for assessing market health and investor confidence.

Despite the current volatility, institutional interest in digital assets remains strong, as indicated by Bitcoin's network growth and ETF trading volumes. This ongoing institutional engagement may provide a stabilizing effect on prices over time. Historically, periods of extreme pessimism in the market have preceded major bull runs, suggesting that traders could soon shift from panic to accumulation.

In conclusion, while the cryptocurrency market faces immediate challenges, the long-term outlook may be more optimistic. If key macroeconomic conditions improve and institutional buying increases, Bitcoin could potentially rise above the $100,000 mark by the end of 2025. For now, traders must navigate the volatility wisely to position themselves for future rewards.

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Bybit x Santiment: Crypto strategic reserve unnerves market; investors turn cautious

A crypto strategic reserve is essentially a state-sanctioned reserve of Bitcoin or other digital assets designed to function similarly to the gold reserves held by governments.

Over the past year, cryptocurrencies have gained more acceptance and legitimacy in the eyes of government officials and politicians. One positive result of this development is the concept of a Bitcoin and crypto strategic reserve, which aims to create a state-backed store of value similar to the more traditionally held gold reserves.

In this article, we’ll explore what a Bitcoin and crypto strategic reserve is, Trump’s executive order establishing the strategic reserve and the broader political and market implications of such a move.

Trump's signs executive order for US crypto strategic reserve

In August 2024, then-presidential candidate Donald Trump publicly supported the idea of a US Bitcoin reserve during his campaign, arguing that a state-backed digital asset would not only boost national prestige but also provide a critical counterbalance in an increasingly digital financial ecosystem.

On Mar 2, 2025, President Trump announced a broader 

 that would extend the idea to other major cryptocurrencies, such as ETH, SOL, XRP and ADA.

 an executive order (EO) to establish a “Strategic Bitcoin Reserve and a U.S. Digital Asset Stockpile.” Both the reserve and stockpile would contain BTC and other digital assets held by the Department of Treasury that were seized from criminal proceedings. However, the EO also mentioned the possibilities of developing “budget-neutral strategies for acquiring additional bitcoin” without using public funds.

The initial market reaction to the Mar 2 announcement was positive. All of the coins mentioned in the reserve saw significant buying and short covering, which led to double-digit gains across the board. For example, BTC was up 12%, ETH gained 16%, SOL rallied by 28% and XRP saw a major 35% gain. ADA was the biggest gainer, rallying as high as 72% following the announcement. 

While immediate reactions were positive, there were also several prominent figures, even within the crypto community, who questioned the inclusion of other assets — apart from Bitcoin — into initiatives for the strategic crypto reserve.

However, following Trump’s executive order to establish the strategic reserve on Mar 7, BTC 

 by around 5.7%, as market participants were left underwhelmed. Despite David Sacks, Trump’s crypto and AI tsar, calling the reserve a “digital Fort Knox,” investors were disappointed that this signalled no additional purchases of Bitcoin or other digital assets.

A Bitcoin strategic reserve is essentially a state-sanctioned reserve of Bitcoin designed to function similarly to the gold reserves traditionally held by governments. It's a common practice of governments to hold gold as a reserve to protect their national currencies in case of an emergency. Gold often forms a large share of forex reserves for most countries. The table below shows the top 10 nations holding gold reserves as of Feb 7, 2025.

Since Bitcoin has largely gained acceptance as 

, the idea behind a Bitcoin strategic reserve is to create a decentralized, secure vault system whereby Bitcoin is stored and managed by federal governments. By allocating a portion of national reserves to Bitcoin, governments could theoretically strengthen their balance sheets and diversify away from fiat currencies that are vulnerable to inflationary pressures.

Proponents of such a move argue that Bitcoin’s finite supply and decentralized nature makes it an effective store of value. Its global acceptance and increasing institutional interest lend further credibility to this idea.

In July 2024, US Senator Cynthia Lummis introduced the “Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide” 

. It’s a legislative proposal aimed at establishing a strategic Bitcoin reserve in the United States. The press release from Senator Lummis’s office outlines several critical components of the bill, as follows:

What does the strategic reserve mean for the future of Bitcoin?

The idea of a Bitcoin strategic reserve is innovative, and aims to use Bitcoin to improve the balance sheet of nation states. This could be a win-win, as Bitcoin would benefit from increased legitimacy while nation states would be holding an asset that potentially provides better returns than those of gold. 

While there will be no immediate acquisition of Bitcoin from the US government, the reserve implies that there will be no selling pressure from the roughly 200,000 BTC (almost $17.4 billion) held by the US government. However, it remains to be seen if other strategies to acquire additional BTC without incurring cost to US taxpayers will be implemented.

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Crypto Strategic Reserve: The BITCOIN Act and beyond

This is a guest post written by TheBlockchain Today, a crypto analyst and writer, founder of Whaleportal and host of The Blockchain Today YouTube channel.

This is a guest post by TheBlockchain Today, a crypto analyst & writer, founder of Whaleportal and host of The Blockchain Today. Find more of his educational videos at The Blockchain Today's YouTube channel (@TheBlockchainToday). 

Introduction: Why sentiment is a key factor in trading

Price movements aren’t just about indicators like the RSI, MACD, or candle stick patterns, they’re also driven by human emotion. When traders become extremely optimistic, they tend to buy aggressively, often pushing prices higher in a short period. However, once this excitement fades, the market frequently corrects. Similarly, on the other extreme, when fear takes over and sentiment turns extremely negative, most short-term traders are sidelined. They are too scared to enter the markets. Ironically, this is often when markets start recovering. There is a very simple market mechanic at work here — when traders are afraid they sell, leaving more money on the sidelines to potentially enter the markets again. When traders are too optimistic, most money has been positioned, leaving the market with more potential sellers. 

By understanding these emotional cycles, traders can avoid reacting on emotions like FOMO (fear of missing out) and panic selling, leading to better decision-making. Instead of reacting in an emotional way to the markets, traders try to understand the sentiment and use it to their advantage. 

The market sentiment is essentially the collective mood of traders at any given time. This mood is shaped by a variety of factors, including news, price action and social media. Here’s how it typically plays out:

This cycle repeats itself over and over again in different timeframes. Recognising it early can prevent traders from buying the top or selling the bottom. Let’s have a look at the fear and greed indicator. 

In the chart above you can see the BTCUSDT chart with the Crypto fear and Greed Indicator.  Generally when the sentiment is overly negative, price tends to go up and when the sentiment becomes overly positive, price needs to cool down. 

How to identify short-term sentiment shifts

While long-term sentiment indicators like the 

 provide a broad market outlook, short-term sentiment can be very useful too. Here are some of the best ways to spot sentiment shifts in real time:

A quick way to assess sentiment is by analyzing content on 

Twitter, YouTube and crypto news platforms

How Bybit traders can use sentiment to stay rational

Sentiment should never be the sole factor in making trading decisions, but it can serve as a confirmation tool. Here’s how Bybit traders can use it to their advantage:

The sentiment is often overlooked by traders. However, it is still an important metric to include in one's analysis, not just to get better entries and exits but to avoid mistakes. It can give traders a clear edge as many market participants are often stuck in the emotional state of the markets.

This article does not provide financial advice in any way, shape, or form. It is intended solely for educational purposes and should not be construed as a recommendation to buy, sell, or invest in any financial products or services. 

The information presented is for general knowledge only and does not account for individual circumstances, risk tolerance, or financial goals. Always conduct your own research and due diligence. 

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The Role of Short-term Sentiment in Trading

Trading

Trading the bull flag pattern helps you to spot continuations in price and capture large price swings. But does it work in crypto? Learn more.

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Trading the bull flag pattern helps you spot continuations in price and capture large price swings with ease. Usually, it’s tough to enter into a fast-moving trade within a market, but it’s easier to time the market with the bull flag chart pattern.

In fact! Did you know the most explosive moves in any market (stock, forex, commodity, or cryptocurrency) are the result of price pattern breakouts such as flags?

The best traders in the world have many trading strategies in their arsenal. However, one of the most popular is the bull flag pattern, along with its counterpart, the bear flag. These patterns allow traders to participate in trending markets, understand price moves, and establish low-risk entries.

Whether you’re a beginner or experienced trader, here’s an overview of what this chart pattern is all about. Here’s what you’ll learn:

A bull flag is a technical pattern that provides an accurate entry to participate in a strong uptrend. Many professional traders use this continuation pattern to find the optimal place to trade with the trend.

It’s important to note that the bull flag pattern perfectly suits cryptocurrency market conditions because of the powerful trends from which savvy investors can benefit. Whether you intend to use this flag pattern for 

, it works very well. Flag patterns are beneficial for trading after a breakout or during a strong trending market.

In short, the main purpose of the bull flag pattern is to help you participate in the current momentum of the market. That means you can leverage the information it provides to determine entry levels where risk is low compared to the possible reward. From the visual perspective, this pattern has a previous strong movement to the upside (the pole) and then a consolidation that takes the form of a flag.

The following BTCUSD 15-minute chart is an excellent example indicating the main elements that create the bull flag pattern.

In essence, the bullish flag formation has three main features:

2. A downward sloping consolidation, aka the flag

3. The continuation following the break of the upper channel resistance

Identifying the bull flag formation in real-time provides an edge in the market, particularly for crypto traders. This is because it helps identify the areas where corrective action occurs before the previous trend continues.

First of all, however, we need to know the key features to look for when trading the bullish flag pattern. This chart pattern must include previous momentum, usually represented by consecutive bullish bars to the upside.

Later on, corrective action should take the form of consolidation. Usually, the price correction can be framed within a downtrend channel, pennants, triangles, or sideways action.

The third stage of the bull flag pattern is the break of the flag, which provides the ideal entry signal.

The bullish flag pattern’s initial profit target will be around the previous swing high, and the stop-loss order can be placed below the consolidation structure.

Additionally, the bull flag profit target can be established by measuring the distance in price between the flagpole’s base and the highest point of the flag. To pinpoint your exact profit target, you need to project the measured move to the upside starting from the breakout point.

The below BTCUSD 15-minute chart clarifies the details of this formation.

Finally, follow these steps to identify the bull flag pattern:

Identify directional movement to the upside. Usually, this momentum can be framed under consecutive bars to the upside, with very few retracements bars.

Wait for corrective action. Usually, this correction can be framed under a downtrend channel, where a structure like a lower low can be presented.

Define the breakout level to enter the order. More details about the trading execution are presented in the next section.

At first glance, flag chart patterns look almost identical to pennant patterns. They are both continuation patterns that form whenever there’s a sharp price movement, followed by a sideways price movement. Usually, they only last around one to three weeks. But despite the similarities, there are indeed some differences. 

. It’s normally characterized by converging trend lines, which occur when successive highs and lows form a trading range. With the steep move up or down, it’s consolidated in the pennant form, with descending resistance and rising support. Generally, you would want to use pennants in conjunction with other 

 to serve as confirmation. A good practice is to use the 

(RSI) indicator to moderate during the consolidation phase and reach oversold levels.

A flag pattern forms when a steep rise (or fall) is first followed by trading in a narrow price range, then by a steep rise (or fall). Typically, a flag helps to make sure the candle closes above the 

To succeed in trading with flags or pennant chart patterns, it’s wise to always use volume as a guide to deciding on your entry and exit points of a target price. That’s because it’ll help you to confirm the breakouts and to speculate on the momentum after it.

Ultimately, the patterns may or may not be defined at a particular time. However, as long as you’re patient, they will form at the right time.

Now that we know how to identify the bull flag pattern, it’s important to define specific criteria to understand how to trade it.

After the flag pattern has been identified, the entry should be located where the downtrend channel (the structure that frames the flag) fails to keep its downward momentum.

The long entry must be placed at the break of the flag, while the stop-loss order (risk) should ideally be placed below the consolidation flag. The first target should be around the previous swing high. If the trend is strong enough, the movement will continue.

Of course, trade management varies. It mainly depends on the style of each trader. Still, one good strategy is to close a part of the position around the previous swing high. Then, trail the stop-loss order based on a 

 provides a detailed, step-by-step guide to identify a bull flag and trade it effectively.

First of all, the prevailing trend must have strong bullish momentum, as mentioned above. This momentum is usually framed under consecutive bullish bars to the upside, with very few corrective actions.

The directional movement is strong in the image below, and there are only a few small retracements. 

Secondly, we must wait for the consolidation. In this case, after a lower high is made, a line for a downtrend channel can be drawn, and we can be ready for the break of the flag if it occurs.

When the flag is broken by the price, the long entry is triggered. At the same time, the stop loss would be placed at the opposite side of the flag pattern. The red area represents the risk (the amount of money that we may lose), and the green area represents the potential reward.

After the entry is triggered, it’s time to wait and see what happens. In this example, the price goes straight to the previous swing high. 

Trade management should be done based on the trader’s risk profile. The fastest way to cash in some profits is to close only a portion of the position around the target area and let the rest of the position run. 

Alternatively, you can close the entire position all at once by projecting the flagpole price range to the upside. For this particular example, the price keeps going, making new highs. 

Bear in mind that many bull flag trading strategies are based on different price formations and shapes of the flag. The period of consolidation that forms the flag can take the following shapes:

The anatomy of a breakout consists of three stages:

 (flag price structure) should be well-defined within two down-sloping parallel trend lines.

, a genuine breakout, occurs when the price spikes through the upper resistance line. The key element is that the breakout needs to be accompanied by heavy volume.

, in which a breakout is confirmed by the price closing above the upper resistance line, along with sustained follow-through buying above the flag.

The consolidation that makes up the flag tends to have well-defined support and resistance levels. While the consolidation shows equilibrium between the forces of supply and demand, it can also be seen as the calm before the storm.

Because the prevailing trend is upward, there’s a higher probability of trend continuation and, subsequently, an upward breakout. Usually, investors who have accumulated and bought into the cryptocurrency during the initial rally still hold their bags. Then, during the consolidation phase, investors who have missed the initial drive-up will try to get their hands on the cryptocurrency as well.

The excessive buying interest will eventually cause an imbalance between supply and demand forces and drive the price higher.

In conclusion, it’s important to understand that most trends are the result of a breakout.

The difference between a bullish and a bearish flag is in the direction of the price movement. With the bullish flag, the idea is to participate in a strong uptrend. Meanwhile, with the bearish flag pattern, the idea is to trade short in the direction of the prevailing downtrend.

Cryptocurrency provides the opportunity to find both bullish and bearish flags. This is because it’s a market with high volatility (directional movements), where opportunities to trade long or short are presented almost daily, depending on the execution time frame.

In general terms, the trading concepts for a bullish flag listed in this guide can be applied to the bearish flag as well.

To better understand how to identify a bearish flag pattern and trade the continuation move, we’ll outline a trade example.

, the price is trading sideways between the support of $1,685 and the resistance of $1,720 (the two areas are highlighted in light blue). Notice how the price breaks the support to the downside. At this point, there are only two possible outcomes:

1. A continuation of the breakdown, in which the immediate downtrend continues.

2. A failed breakout that reverses the prices back to the previous range.

Therefore, if we want to play the continuation for the breakout, we should wait for some corrective action (the flag) to participate in the downtrend.

The bearish flag pattern offers low-risk entry points if you enter on the breakout of the flag formation. We’ll use the same entry concepts that are applied to the bullish flag pattern.

In the next chart, we can see that the price makes a higher low, a point from which we can draw the flag. If the higher low is unable to hold, the ideal entry will be below that price structure.

The entry-level and stop-loss level is illustrated in the next chart.

At the next stage, the price eventually breaks below the flag and triggers the short entry.

The previous swing low is essential if we want to define the strength of the sellers — or, in other words, the strength of the downtrend. If the price is unable to break it, the downtrend might not have enough momentum. In this case, we may have to tighten our 

Effectively, after the price breaks the swing low, the downtrend continues to the next level of support (blue line).

This example illustrates the dynamic of how to spot and trade a bearish flag. It also clarifies the similarities with the bull flag pattern, which has the same core properties. The only difference between the bull flag and the bear flag is in the direction of the prevailing trend.

In general, flag patterns and pennants are reliable. The bull flag has been proven to work and is used by profitable traders around the world. Of course, trading is full of uncertainties. Still, these indicators and chart patterns offer traders certain confidence. However, they come with a set of pros and cons — and bull or bear flags are no exception.

• A bull flag breakout provides a well-defined price level to enter a long trade. It establishes a clear place for the stop-loss order, thereby providing the right support for proper trade management.

• Usually, this pattern provides asymmetrical risk-to-reward scenarios in which the potential profit (target) is larger than the risk. In other words, it’s a pattern that offers the basis for a good risk management system.

• The bull flag pattern is a simple formation to use in a trending market. The steps to identify the pattern are clear-cut.

The main risk of the bull flag pattern is the potential for 

. Some people may experience negative results executing this pattern because the context is not framed under a trending environment but, rather, a sideways market.

To minimize the risks and increase the chance of success, spend your time studying several bull flag charts so that you can get used to its action. This way, when it’s time to execute the pattern, it will come more naturally.

What Is A Bull Flag Pattern (Bullish) & How to Trade With It

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