Research Summary
The report provides a comprehensive analysis of the crypto derivatives market, focusing on the impact of the ETF announcement on Bitcoin (BTC) and Ethereum (ETH). It discusses the volatility, futures, and options of both cryptocurrencies, highlighting the changes in demand and yield rates.
Key Takeaways
ETF Announcement Impact on Volatility
- Decrease in Implied Volatility: The report notes a significant decrease in implied volatility for both BTC and ETH following the ETF announcement. This suggests that the market’s perception of risk has reduced post-announcement.
- Volatility Smiles: The report highlights that the demand for short-term out-of-the-money (OTM) puts, which caused a negative skew in short-dated volatility smiles, has passed. This indicates that concerns of a “sell-the-news” event have dissipated.
Changes in Futures Market
- Healthy Demand for Leveraged Long Exposure: Despite the decrease in implied volatility, there is still a healthy demand for leveraged long exposure in both listed and perpetual markets for BTC and ETH. However, the rates remain far below the high rates seen at the beginning of the month.
- Yield Rates: BTC annualized yields remain above 10% across the term structure, while ETH annualized yields have begun to increase again following the ETF announcement.
Perpetual Swap Funding Rate
- Positive Trend for BTC: The BTC funding rate has begun to trend upward following the ETF announcement, indicating a positive market sentiment.
- Continued Demand for ETH: The ETH funding rate remains positive, indicating continued demand to pay for leveraged long exposure.
Options Market
- Decrease in BTC Implied Volatility: The BTC SABR ATM implied volatility, which reached 90% ahead of the ETF news, now trades between 50% and 60% across the term structure.
- ETH Follows Similar Trajectory: ETH SABR ATM implied volatility did not reach the same heights as BTC, but follows a similar trajectory following the event.
Volatility Surface
- Changes in BTC Implied Volatility: The BTC implied volatility surface indicates that 3-month tenor OTM calls see the sharpest fall in implied volatility, while long-tenor OTM puts have risen.
- Elevated ETH Implied Volatility: The ETH implied volatility surface remains elevated across the surface when compared with its 30-day historical distribution.
Actionable Insights
- Monitor the Volatility: Investors should keep a close eye on the volatility of BTC and ETH, as it can provide insights into market sentiment and potential price movements.
- Consider the Futures Market: The healthy demand for leveraged long exposure in both listed and perpetual markets for BTC and ETH could present opportunities for investors looking for exposure to these cryptocurrencies.
- Assess the Funding Rates: The upward trend in BTC funding rates and the continued positive ETH funding rate could indicate potential opportunities for investors in the perpetual swap market.
