Crypto Derivatives Market Analysis: Key Trends in February 2025

Stay updated with expert insights on crypto derivatives markets as we break down the latest institutional research.

Market Overview

The recent crypto spot market selloff has impacted ETH and altcoins more severely than BTC, a trend mirrored in derivatives activity. ETH now trades at a notable volatility premium compared to BTC, with its term structure showing deeper inversion. While short-tenor volatility skews toward puts for both assets—reflecting bearish sentiment—longer-dated tenors maintain a bullish bias for OTM calls. Notably, BTC’s perpetual funding rates stayed positive during the downturn, whereas ETH’s failed to reach the lows seen earlier in February.

Key Observations:

ETH vs. BTC Volatility: ETH derivatives show stronger inversion and put skews in short tenors.
Funding Rates: ETH’s perpetual swaps underperform BTC’s resilience.
Long-Term Sentiment: Persistent call skew in longer-dated options signals residual bullish expectations.

BTC Options Analysis

ATM Implied Volatility (1-Month Tenor)

BTC’s term structure trades marginally flatter, with short-tenor volatility skews heavily favoring OTM puts. However, tenors beyond one-month remain tilted toward calls, indicating divergent short vs. long-term outlooks.

👉 Explore real-time BTC options data

Critical Metrics:

25-Delta Risk Reversal: Bearish skew in short tenors contrasts with sustained call demand in longer expiries.
SVI ATM Volatility: Reflects moderate flattening compared to ETH’s steeper inversion.

ETH Options Analysis

ATM Implied Volatility (1-Month Tenor)

ETH’s term structure inversion surpasses BTC’s but remains below the peak observed on February 3, 2025. Short-tenor put skews dominate, while longer-dated smiles uphold bullish positions.

Notable Trends:

Risk Reversals: Aggressive put buying in near-term options vs. stubborn call premiums in long-dated contracts.
Historical Context: Current inversion levels are less extreme than early February’s downturn.

Volatility Surface Dynamics

Market Composite

The volatility surface highlights ETH’s elevated premium over BTC, particularly at the front end. Listed expiries and constant maturity smiles reveal:

Short-Dated Skews: Put-heavy for both assets.
Long-Dated Tenors: Call optimism persists despite spot market pressures.

👉 Compare volatility surfaces across exchanges

Risk Disclosures and Disclaimer

This report is for informational purposes only and does not constitute financial advice. Cryptocurrency markets are highly volatile; investors should conduct independent research and consult financial professionals before trading. Past performance ≠ future results. Full disclaimers apply.

FAQ Section

Q1: Why is ETH’s volatility premium higher than BTC’s?
A: ETH’s price sensitivity to market downturns and altcoin ecosystem risks amplify its derivatives pricing.

Q2: What does an inverted term structure indicate?
A: It suggests near-term uncertainty (higher short-dated vols) outweighing longer-term expectations.

Q3: How reliable are longer-dated call skews as bullish signals?
A: While indicative, macroeconomic shifts or regulatory news can override these patterns abruptly.

Q4: Why haven’t BTC funding rates turned negative?
A: Strong institutional demand for BTC hedges may be propping up rates despite spot declines.