Crypto Derivatives 28 May 2024

Keep up with the latest in crypto market commentary as we share the insights from our institutional research partners.

In this edition, we share the latest crypto derivatives weekly from Block Scholes.

Volatility has fallen across the term structure in both majors over the past week as they continue to trade near range highs of $68.9K and $3.9K. Following the news of an upgrade in the probability of an Ethereum ETF, implied vol spiked at the front-end, inverting the term structure. This inversion has since corrected itself, with implied vol at the front-end falling. BTC’s vol smile skew has fallen to more neutral levels as implied vol for OTM calls falls, indicating reduced short-term bullish sentiment. However, ETH is heavily skewed towards calls due to implied vol for OTM puts falling, as investors reposition themselves due to the recent ETF news. Demand for leveraged long exposure, which is stronger in ETH, fell at the start of the week, as indicated by spot yields, before rising again at the front-end.

Futures Implied Yield, 1-Month Tenor

ATM Implied Volatility, 1-Month Tenor

Futures

BTC Annualised Yields

Yields at short-dated tenors increased steadily, before spiking, and then falling, as BTC spot reached range highs.

ETH Annualised Yields

Yields at short-dated tenors initially fell, following a muted reaction to the ETH ETF news, before rising again.

Perpetual Swap Funding Rates

BTC Funding Rate

Continued to trade positively over the past week as BTC spot price approached range highs, with more volatility compared to the rest of the month.

ETH Funding Rate

Has traded at similar levels to BTC, however, there does appear to be some dislocation between the USD, and more-illiquid USDC margined tokens.

BTC Options

BTC SVI ATM Implied Volatility

Vol at the front-end fell to monthly lows as BTC appeared to reject from range highs, before recovering.

BTC 25-Delta Risk Reversal

Skew has fallen at all tenors, particularly at short-dated tenors as implied volatility for OTM calls falls, indicating reduced short term bullish sentiment.

ETH Options

ETH SVI ATM Implied Volatility

The heavy inversion seen at the front-end following the news of an upgrade in the probability of an ETH ETF has since corrected itself, with implied vol falling to pre-news levels.

ETH 25-Delta Risk Reversal

Is heavily skewed towards calls due to implied volatility for OTM puts falling more than OTM calls.

Volatility by Exchange

BTC, 1-Month Tenor, SVI Calibration

ETH, 1-Month Tenor, SVI Calibration

Put-Call Skew by Exchange

BTC, 1-Month Tenor, 25-Delta SVI Calibration

ETH, 1-Month Tenor, 25-Delta SVI Calibration

Market Composite Volatility Surface

Listed Expiry Volatility Smiles

Cross-Exchange Volatility Smiles

Constant Maturity Volatility Smiles

The information provided in this document by Block Scholes Ltd is for informational purposes only and does not necessarily represent the views of OKX. Any additional disclaimers issued by these third parties are also applicable and should be considered as part of this document.

This report is not intended as financial advice, investment recommendation, or an endorsement of specific trading strategies. The contents of this report, including but not limited to any graphs, charts, and numerical data, are provided “as is” without warranty of any kind, express or implied. The warranties disclaimed include but are not limited to performance, merchantability, fitness for a particular purpose, accuracy, omissions, completeness, currentness, and delays.

The cryptocurrency markets are highly volatile and unpredictable, subject to substantial market risks including significant price fluctuations. The strategies, opinions, and analyses included are based on information available at the time of writing and may change without notice. They are also based on certain assumptions and historical data that may not be accurate or applicable in the future. Therefore, reliance on this report for the purpose of making investment decisions is at your own risk.

Past performance is not indicative of future results. While we strive to provide accurate and timely information, we cannot guarantee the accuracy or completeness of any data or information contained in this report. We are not responsible for any losses or damages arising from the use of this report, including but not limited to, lost profits or investment losses.

Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The inclusion of any specific cryptocurrencies or trading strategies does not constitute an endorsement or recommendation by OKX.