Perpetual Swap Contracts Took a Huge Hit During Mondays Crash: Heres the Damage
The week started on a shaky note for United States financial markets, including the crypto space, after President Donald Trump imposed trade tariffs on imports from Canada, Mexico, and China. Cryptocurrencies bled billions of dollars across all markets, including spot and derivatives.
According to a weekly report by the leading crypto derivatives exchange Bybit and the institutional-grade analytics and research platform Block Scholes, the market bloodshed left an estimated $10 billion-sized hole in open interest for perpetual swap contracts. While some crypto assets maintained positive funding rates, others endured heightened turbulence.
Perpetual Swaps Lose Billions Amid Sell-off
The estimated $10 billion wipeout was revealed by Bybit CEO and co-founder Ben Zhou, citing the exchanges options data. However, in the latest report, Bybit said Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), and Solana (SOL) saw more than $3.1 billion in open interest losses across their perpetual swap contracts.
Amid the market turmoil, trading volumes across perpetual swaps surged to a monthly high of $31 billion as traders scrambled to exit their positions. Despite the rush, there were a lot of liquidated leveraged positions as traders missed their margin calls during the sharp drop in spot prices of BTC, ETH, XRP, and SOL.
Monday was the second consecutive one with a morning sell-off the market also bled on January 27 due to the emergence of DeepSeek, a much cheaper artificial intelligence model and as a result, perpetual swap funding rates spiraled downwards. Only bitcoin funding rates remained afloat at a neutral level.
BTCs open interest didnt fall in the same way that we observed in perpetual swap markets. This suggests that there was neither a significant notional value of options open interest liquidated in the spot sell-off, nor did the sell-off result in a significant spike in trade volumes at the beginning of the month, the report said.
ETH Leads Altcoin Decline
Altcoins, on the other hand, showed a more persistent negative trend after the crash as bears dominated the market, with ETH leading the way. Realized volatility for the second-largest cryptocurrency rose above 140%, its highest level in more than three months. In addition, ethers implied volatility term structure spiked and remained inverted for days after the sell-off.
Alongside ethers negative funding rates, the cryptocurrencys spot price saw a deeper correction than bitcoins, falling to $2,500. With ethers implied volatility approximately 15 points higher than bitcoins at equivalent tenors, traders expect continued volatility as the assets downside has not been fully priced in.
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Text source: CryptoPotato
