New data from the cryptocurrency derivatives market suggests a growing bearish sentiment among traders, with options activity indicating expectations of further price declines for major digital assets like Bitcoin (BTC) and Ethereum (ETH).

A new report from crypto exchange Bybit, developed in collaboration with analytics and research platform Block Scholes, highlights a marked increase in implied volatility levels across various expiration dates for both Bitcoin and Ethereum options.

This surge is particularly pronounced in short-term options, signaling heightened near-term uncertainty.

“Implied skew—that is, the difference in implied volatility between out-of-the-money puts and calls—can reveal current market sentiment for BTC and ETH options,” explained Bybit lead technical writer Nathan Thompson to Decrypt. “Higher implied volatility for calls is a bullish indicator, whereas higher implied volatility for puts is bearish.

“Right now all signs emanating from options markets suggest there is greater downside,” he added.

The derivatives markets are showing a clear skew towards out-of-the-money put options for both Bitcoin and Ethereum in the short term, the report notes. This trend points to a strengthening short-term bearish outlook as spot prices struggle to recover from recent declines.

For Bitcoin options, there’s now a higher level of open interest in put options compared to calls, meaning traders are positioning themselves for potential downside moves. This comes alongside a decline in total open interest for perpetual swaps following the most recent sell-off.

The bearish sentiment isn’t limited to Bitcoin and Ethereum, the report notes. Solana (SOL) has been experiencing consistently negative funding rates for perpetual swaps over the past week.

Thompson says that such rates are suggestive that a bottom is starting to form—and even if SOL wicks lower, it is unlikely to drop significantly from current levels. He also cautioned against drawing broad conclusions about the entire Layer 1 and Layer 2 ecosystem.

“There’s no significant inferences about L1 and L2 networks that can be drawn from SOL’s current performance, other than the fact that all crypto assets remain highly correlated,” he noted.

The report also pointed out that after the August 30 options expiration date, open interest for call options has decreased more significantly than for puts. This, combined with recent price drops and the failure of spot prices to recover, has likely contributed to growing skepticism of an upswing.

With the overall trends observed in derivatives data, Thompson says inexperienced traders would do well to sit on their hands until the market works out which way it wants to move.

“Those who are feeling bolder may wish to set calls that will expire at the end of September, by which time the current uncertainty should have eased,” he adds.