Research Summary
The report provides a comprehensive analysis of the crypto derivatives markets, focusing on Bitcoin (BTC) and Ethereum (ETH). It discusses the volatility, yields, and funding rates of these cryptocurrencies, and how they have been affected by recent market trends. The report also includes snapshots of futures, options, and volatility by exchange.
Key Takeaways
Volatility and Term Structure
- Increased Front-End Volatility: The report notes that the implied volatility at the front-end of the term structure for both BTC and ETH has increased over the past week. This is due to BTC’s failure to break range highs, leading to a more compressed term structure.
- ETH Skew Towards OTM Puts: The volatility smile skew for ETH is skewed towards out-of-the-money (OTM) puts at short-dated tenors. This is because the implied volatility for OTM puts has risen by approximately 8% over the past week.
Yields and Funding Rates
- Decreased Annualised Yields: The report highlights that annualised yields have fallen across the term structure for both BTC and ETH. This is attributed to the decreased demand for leveraged long exposure following BTC’s inability to break range highs.
- Funding Rates Near Zero: Both BTC and ETH funding rates continue to trade close to zero. This indicates that the futures price trades at similar levels to the spot price.
Options and Futures
- BTC Options Skewed Towards OTM Calls: The report notes that the skew for BTC options at all tenors has largely traded sideways over the past week and remains skewed towards OTM calls.
- ETH Futures Snapshot: The snapshot of ETH futures shows a correction in the previously inverted term structure as yields fell, most notably at the front-end.
Volatility by Exchange
- Deribit and Bybit Show Similar Trends: The report includes a comparison of volatility by exchange, showing similar trends for Deribit and Bybit. Both exchanges show an increase in volatility at the front-end and a sideways trend at the back-end for both BTC and ETH.
Actionable Insights
- Monitor Short-Dated Tenors: Given the increased implied volatility for ETH at short-dated tenors, investors should closely monitor these for potential trading opportunities.
- Consider Funding Rates: With funding rates trading close to zero for both BTC and ETH, investors might want to consider this when making decisions about futures trading.
- Track Exchange Volatility: The similar volatility trends on Deribit and Bybit suggest that investors should track volatility across different exchanges to identify potential discrepancies or arbitrage opportunities.
