Bybit Report: Crypto Sentiment Improves as Global Risk Appetite Returns – Derivatives Market Stabilizes Amid Recovery
In a week marked by cautious optimism, the cryptocurrency market has begun to steady itself following a severe downturn, with a new report from Bybit highlighting a significant improvement in investor sentiment tied to a resurgent global risk appetite. The recovery, characterized by a slow-and-steady climb from seven-month lows, has been accompanied by stabilizing derivatives markets and positive macroeconomic signals, suggesting a potential shift in market dynamics after a period of extreme bearishness.
Gradual Recovery Takes Hold in Crypto Derivatives
The recent sell-off that rattled the digital asset space last week had a pronounced effect on the derivatives market. However, according to a collaborative report from the crypto exchange Bybit and the data and analytics platform Block Scholes, the market is now showing clear signs of improvement. The data indicates that Bitcoin (BTC) and Ethereum (ETH) have bounced back to levels above $92,000 and $3,000, respectively.
This price recovery is occurring alongside improved global risk appetite and positive macroeconomic signals. A key metric for gauging market health, the funding rates for BTC and ETH perpetual swaps, has recorded several sessions of positive rates this week. Notably, these funding rates remained positive throughout the recent sell-off. In contrast, altcoin perpetuals underperformed their larger counterparts. During the weekend sell-off, altcoin pairs were paying extra for leveraged short exposure, indicating higher demand to bet on further price declines.
Despite the recovery, overall participation in the derivatives market has remained low since the liquidation event on October 10. Open interest and volumes have stayed relatively low across altcoin derivatives instruments. Nevertheless, analysts point to short-term implied volatility levels as a sign that the most extreme fears of immediate downside have been priced out by traders.
The report stated, “Short-tenor implied volatility levels no longer trade at such an extreme premium after the normalization of the term structure of volatility, and puts no longer hold as strong a premium above calls (despite not fully pricing out a preference for downside protection).” This normalization suggests a market that is moving away from panic and toward equilibrium.
Altcoin Divergence and Spotlights on Recovery Leaders
The reaction in the altcoin derivatives market last weekend revealed a distinct narrative from that of Bitcoin and Ethereum. The data suggested relatively high demand for short exposure on altcoins, as traders sought to profit from what they perceived as continued vulnerability. Concurrently, the options market saw a slight reduction in the skew towards puts for these assets.
As the broader market entered a phase of slow-and-steady recovery this week, several large-market-cap altcoins demonstrated notable strength. The assets that improved the most during this period include Solana (SOL), Toncoin (TON), Cardano (ADA), and Curve DAO (CRV). These cryptocurrencies recorded significant open interest in their perpetual swaps, signaling renewed trader attention and capital inflow as sentiment began to turn.
The Macroeconomic Landscape Provides a Tailwind
The recuperation of crypto assets has not occurred in a vacuum; it has coincided with a more positive trend in the global macroeconomic landscape. Key traditional market indices like the S&P 500 have recorded upward movement, reflecting a renewed appetite for risk among investors worldwide. A significant development has been the end of the U.S. government shutdown, an event that has cleared some of the uncertainty clouding the Federal Reserve's judgment ahead of its upcoming Federal Open Market Committee (FOMC) meeting.
This clearing of political fog has led to increased market speculation. According to the context provided by the report's analysis, there is a high chance the next FOMC meeting will conclude with a 25 basis points (bps) rate cut. Such a monetary policy decision is widely viewed as a potential catalyst for risk-on assets, possibly triggering a more sustained Bitcoin rally and providing further support for the recovering crypto market.
Strategic Conclusion: A Market in Transition
The findings from the Bybit and Block Scholes report paint a picture of a cryptocurrency market in transition. The intense fear that dominated trading last week is demonstrably receding, replaced by a cautious but tangible optimism. The stabilization of derivatives metrics for Bitcoin and Ethereum, coupled with the outperformance of specific altcoins like Solana (SOL), Toncoin (TON), Cardano (ADA), and Curve DAO (CRV), indicates that investor confidence is slowly being rebuilt.
For professional traders and long-term investors, the current environment underscores several critical points. First, the divergence between major cryptocurrencies and altcoins during periods of stress and recovery remains a key dynamic, requiring differentiated risk management strategies. Second, the crypto market's sensitivity to traditional macroeconomic events, such as Fed policy decisions and equity market performance, is as pronounced as ever.
Looking ahead, market participants should watch two primary factors: the trajectory of derivatives open interest and funding rates for signs of sustained health, and the outcomes of upcoming macroeconomic policy meetings. A confirmed 25 bps rate cut from the Fed could act as a powerful validator of the current improving sentiment, potentially cementing this recovery phase. While participation rates are still recovering, the pricing out of extreme volatility suggests the foundation for a more stable market advance is being laid.