Crypto Derivatives Market Pulse

Quick Takes: Spot – Volatility Dynamics

• The overnight crypto markets experienced a sharp sell-off, pushing BTC temporarily below $59k?(-6%) and ETH to a low of $2,400 (-8.1%). The drop was heavily supported by long liquidations (BTC USD 300M) with no specific catalyst behind the move.
• Despite the overall market downturn, flow activity was mixed, with light buying of BTC and more aggressive selling of ETH. Both have since rebounded approximately 3% from their recent lows.
• Following the liquidation, implied volatility spiked, particularly for short-dated options, with aggressive repricing of puts. However, longer-dated implied volatility remained stable, likely due to ongoing longer-dated call overwriting.
• U.S. spot Bitcoin ETFs returned to net outflows after eight consecutive days of positive inflows. According to Coinglass, the funds accumulated $756 million during the streak, but yesterday saw a reversal with $127 million in net outflows.
• Bitcoin's dominance, which measures its market cap strength relative to other cryptocurrencies, has continued to rise, reaching 57.5%. This marks an 11% increase since the beginning of the year, bringing BTC dominance to levels last seen in April 2021.
• Ether ETFs also saw their ninth consecutive day of net outflows, totaling $115 million. Yesterday alone, spot Ether ETFs reported $3.45 million in negative flows, extending the downward trend.

Volatility

BTC ATM Implied Volatility:

Volatility for short-dated options has surged by 6%, while longer-tenor options have seen only a marginal increase, remaining close to 60%.

On average, implied volatility across the curve has decreased by approximately 20% from its recent high.

BTC 25 Delta Put Skew:

Following the recent sell-off, BTC option skews have shifted notably. Short-term options, previously slightly favouring the upside, now show stronger demand for puts due to increased concern over near-term risks.

In contrast, longer-term options, with maturities over a month, continue to favour calls, reflecting ongoing optimism about BTC's future price potential.

ETH ATM Implied Volatility:

ETH volatility mirrors BTC's term structure flattening, with long-dated volatility remaining elevated and flat.

However, short-dated volatility has seen a more pronounced increase (especially in comparison to BTC), with a premium of approximately 9% or more across all maturities.

ETH 25 Delta Call-Put Skew:

ETH short-term options exhibit a stronger bias towards puts than BTC, with a notable downward trend across all maturities.

The negative skew for 7-day terms in ETH is twice that of BTC, highlighting a more pronounced short-term bearish sentiment in its price.

Author: Carlo Accolla

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