Crypto Derivatives 23 July 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.

While volatility has generally been on the rise for both BTC and ETH, the term structure of volatility has changed dramatically especially at shorter tenors, now having inverted at the front end and continuing to trade at a premium for ETH options compared to BTC options. Volatility skew suggests that call options are preferred for both digital currencies. A general bullish trend is observed but more strongly for BTC, as reflected in the future implied yield chart and the perp swap funding rate, if not the skew of its volatility surface. Despite the recent approval of an ETH spot ETF, BTC is still holds a stronger bullish sentiment in derivatives space.

ATM Implied Volatility, 1-Month Tenor

BTC Options

BTC SVI ATM Implied Volatility

The term structure has flattened significantly as short-tenor optionality has rallied back above 50%

BTC 25-Delta Risk Reversal

The changing directions of spot price movements are reflected in the change in skew from towards puts to calls

ETH Options

ETH SVI ATM Implied Volatility

ETH volatility remains above BTC’s across the term structure but front-end vols did not rally as hard

ETH 25-Delta Risk Reversal

Like BTC, ETH’s markets are skewed slightly towards OTM calls but have not seen the same extremes in the last week

Market Composite Volatility Surface

Listed Expiry Volatility Smiles

Constant Maturity Volatility Smiles

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