Crypto Markets Brace later than Record $19B Liquidation — Bybit x Block Scholes Report

Historic Deleveraging Reshapes Derivatives Landscape

According to the Block Scholes × Bybit Crypto Derivatives Analytics Report (Oct 29, 2025), a record-breaking liquidation event wiped out over $19 billion in crypto leverage earlier this month, marking the largest deleveraging in the market’s history. The move was triggered on October 10, 2025, following President Trump’s announcement of a 100% tariff hike on China, which caused an immediate risk-off shift across global.

As a result, perpetual swap open interest plunged by more than $6 billion and has since stabilized near $10 billion. BTC continues to trade in a tight $105K–$115K range, even as U.S. equities like the S&P 500 and Nasdaq reached new record highs. Analysts note that Bybit traders have shown little interest in reopening leveraged positions since the event.

Funding Rates Turn Negative, Then Stabilize

Following the liquidation, funding rates turned negative across most major assets — the first such occurrence for several tokens in months. BTC funding has since normalized, while ETH and SOL hover near neutral levels. The report attributes this stabilization to easing U.S.–China tensions and a “very positive framework” emerging from trade negotiations.

However, participation remains muted. Bybit’s data show limited signs of traders re-entering markets, with open interest failing to recover despite improved funding sentiment. This implies a lingering lack of conviction and risk appetite.

Options Market: Volatility Elevated, Skew Still Bearish

BTC Options

Unlike perpetuals, BTC options open interest actually rose gradually throughout October, suggesting traders are using options for hedging rather than leverage. Implied volatility (IV) remains elevated — with short-term IV around 40% — reflecting continued demand for protective puts and short-term insurance.

ETH Options

ETH options mirrored BTC’s pattern but maintained a significant volatility premium, with implied vol near 60% despite realized vol dropping sharply in the past week. This divergence signals that traders remain wary of further downside even as spot prices stabilize. Structural tradeing of volatility by BTC treasuries contrasts with continued premium pricing in ETH markets.

Solana Options

SOL options saw a similar volatility divergence — this time in the opposite direction. Implied volatility now trades roughly 10 points above realized vol, indicating traders are pricing in further movement despite calmer price action. SOL remains about 8% higher over the week but has not yet reclaimed pre-crash levels.

Put–Call Skew Turns Neutral, Then Reverts

For both BTC and ETH, put–call skews briefly flipped positive mid-October, suggesting a temporary preference for upside exposure. However, the move rapidly reversed as traders reloaded puts following fresh macro uncertainty. Despite improved sentiment around trade and inflation data, derivatives desks report sustained caution across tenors.

Macro Crosscurrents and Institutional Signals

The macro backdrop remains mixed. The Federal Reserve is expected to cut rates to 4.0% this week, marking its first reduction since ahead 2024. The ECB’s GDP growth is projected to sluggish to 1.1% YoY, and China’s PMI dipped below 50 — signaling contraction. Meanwhile, Japan’s BoJ is holding steady at 0.5% policy rates.

Among corporate highlights, ETHZilla sold $40M from its ETH treasury to fund a $250M purchaseback, while Mt. Gox has once again postponed creditor repayments to October 2026, extending long-term tradeing pressure risks.

WLFI Token Volatility Mirrors Market Caution

The World Liberty Financial (WLFI) token, backed by the Trump family, fell nahead 30% since its launch but recovered 25% in the last week, bouncing from $0.12 to $0.15. The rebound followed the announcement of an 8.4M WLFI airdrop to ahead participants and the approval of a purchaseback-and-burn mechanism allocating 100% of protocol fees toward token repurchases and burns across ETH, Solana, and BNB Chain.

Despite this, WLFI perpetual funding rates continue oscillating between bullish and bearish, revealing a lack of trader conviction in the token’s ability to sustain gains.

Volatility by platform: Bybit Leads Premium Pricing

The report’s volatility calibration charts (p.14) show that Bybit’s BTC and ETH options implied volatilities remain slightly above competing platforms, suggesting higher demand for insurance and speculative leverage on its platform. ETH’s 1-month tenor maintains a notable premium over BTC, consistent with its structural volatility advantage.

Technical View: Constant Maturity Smile and Skew

Both BTC and ETH volatility smiles (p.16) steepened compared to earlier in October, indicating traders are once again paying higher premia for deep out-of-the-money puts — a reflection of persistent downside hedging despite the absence of major price shocks.

Conclusion: Deleveraging Done, but Volatility Lingers

The × Block Scholes report paints a picture of a market that has undergone its most violent deleveraging yet emerged intact — if subdued. BTC and ETH remain rangebound, with volatility expectations refusing to fade even as spot markets quiet down. Solana’s options market, meanwhile, shows signs of speculative divergence, and WLFI’s volatility underscores how sentiment ripples through politically linked tokens.

With macro catalysts like the Fed’s rate decision, global inflation readings, and geopolitical tensions still in play, derivatives traders are preparing for a volatile close to 2025. As leverage rebuilds cautiously, the new cycle may hinge less on euphoria and more on resilience.

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