Bitcoin's recent surge into the upper $90,000s is having a notable impact beyond just spot prices, influencing traders' positions in derivatives markets. Early indications suggest a shift away from defensive hedging strategies towards more risk-taking behavior. This analysis is drawn from the latest Bybit x Block Scholes Crypto Derivatives Analytics report, released on January 15. The report posits that following a period of range-bound trading lasting over a month, Bitcoin's breakout is now evident in two key areas that typically react quickly to increased trader confidence: perpetual futures positioning and short-dated options pricing.
Changes in the Derivatives Market Post-Bitcoin Breakout
The report highlights an increase in perpetual futures open interest across major assets, which coincides with Bitcoin reaching a two-month high. Generally, rising open interest coupled with increasing prices signifies the entry of new capital into positions, rather than a mere fading of short squeezes. In this context, the interpretation is straightforward: traders are increasing their long exposure in anticipation of further price appreciation. Funding rates are also showing an upward trend, particularly in certain altcoin markets. This is significant because funding represents the "carry cost" associated with holding long perpetual futures positions. A rise in funding rates suggests that traders are willing to pay more to maintain their long exposure, serving as an early indicator of improving risk appetite.
Bybit and Block Scholes also observed that Bitcoin's rally has contributed to a compression of futures term structures. Both Bitcoin and Ether futures curves are now clustered at similar levels across different maturities. This indicates that the market is pricing risk more uniformly, rather than treating near-term and longer-dated exposures as distinct market events.
Are Options Traders Still Hedging Against Downside Risk?
While the options markets are exhibiting a more subtle change, it may offer more significant insights than futures flows. Short-dated Bitcoin and Ether options have moved towards a more neutral volatility skew. This contrasts with an extended period where a bearish bias was priced in. In simpler terms, traders were previously paying a premium for protective puts, but this put premium has decreased as spot market strength has returned. A noteworthy observation is that implied volatility has remained relatively subdued despite the upward price movement. This behavior is not typical of a full-blown panic rally; instead, it suggests that the market is gradually adjusting its positioning, recalibrating expectations rather than preparing for immediate volatility.
A neutral skew does not necessarily imply aggressive bullishness from the market. It signifies a cooling demand for protection, which often precedes an increase in demand for call options.
Investor Takeaway
The transition to a neutral skew serves as an early signal that "risk-off" sentiment is waning. If Bitcoin manages to hold its breakout zone, the subsequent development is likely to be an increase in call option demand and a repricing of volatility upwards.
The $94K–$96K Zone: A Critical Battleground
Bybit and Block Scholes identified the $94,000 to $96,000 range as a crucial level for sentiment shifts. The rationale is straightforward: this zone has already acted as a significant decision point earlier in the month. A prior move through this area briefly shifted options skews back towards neutral, but the market subsequently retreated when Bitcoin failed to sustain its position above this level. Currently, positioning has shifted again, but analysts emphasize that a sustained break above this area is still required for options markets to reprice into a more definitively bullish skew. This price range is closely monitored by most traders. Breakouts typically do not evolve into sustained trends until price levels are held. If Bitcoin were to fall back into its previous range, derivatives markets could reverse their current sentiment as quickly as they changed.
Spot Demand Continues to Support the Rally
Beyond the derivatives market, the report indicates that spot market flows continue to provide support for the current rally. Year-to-date inflows into Bitcoin and Ether spot ETFs remain positive, reinforcing the notion that the current breakout is not solely driven by leverage. Ether also benefits from its own supply-side tightening narrative. The report notes that approximately 30% of ETH's circulating supply is now staked, which reduces the liquid supply available for trading. While this does not guarantee upward price movement, it does alter the supply-demand balance, particularly when risk appetite improves and spot buyers re-enter the market.
Bybit's Chief Market Analyst, Han Tan, characterized the current move as cryptocurrency catching up with other risk assets after absorbing early 2026 geopolitical shocks. He further stated that the rally supports Bybit's long-term target of $150,000 for Bitcoin in 2026. However, he cautioned that the path to this target is unlikely to be smooth, given ongoing geopolitical uncertainties and risks associated with U.S. monetary policy.
Investor Takeaway
An increase in open interest combined with rising funding rates can fuel momentum, but this can lead to crowded positions. If funding rates spike too rapidly, the rally may become fragile and susceptible to sharp pullbacks.
Currently, the signals, though early, are consistent: futures traders are increasing their long positions, options markets are showing reduced defensiveness, and spot flows remain constructive. The next critical test is whether Bitcoin can maintain its position above the $94K–$96K trigger zone long enough to transform this breakout into a sustained trend, rather than another brief escape from its trading range.