Research Summary
The report provides a comprehensive analysis of the crypto derivatives markets, focusing on the divergence in sentiment between BTC and ETH options markets. It also discusses the volatility premium of ETH, the bearish skew of BTC, and the neutral or call skew of ETH. The report further explores the futures implied yield, ATM implied volatility, and the derivatives sentiment of both BTC and ETH.
Key Takeaways
Volatility Premium of ETH
- ETH’s Volatility Premium: ETH continues to trade with a 10-15 volatility premium across the term structure, indicating a higher level of risk and uncertainty compared to BTC. This suggests that investors are pricing in a higher potential for price swings in ETH.
Bearish Skew of BTC
- BTC’s Bearish Skew: The report notes a bearish skew in BTC’s volatility smile at short tenors. This suggests that investors are pricing in a higher probability of price declines for BTC in the near term.
Neutral or Call Skew of ETH
- ETH’s Neutral or Call Skew: In contrast to BTC, ETH’s volatility smile skews neutral or towards calls at all tenors. This indicates that investors are pricing in a balanced or slightly bullish outlook for ETH prices.
Futures Implied Yield
- Recovery of Futures Implied Yield: The report notes a recovery in the fall of future-implied yields to last week’s levels. This suggests that the market is pricing in a return to normal yield levels after a period of decline.
Derivatives Sentiment
- Charging Short Positions: The report observes that funding rates in the two major cryptocurrencies, BTC and ETH, have repeatedly charged short positions since the 9th of June. This phenomenon is observed across perpetual-swap markets, indicating a bearish sentiment in the market.
Actionable Insights
- Monitor ETH’s Volatility Premium: Given ETH’s volatility premium, investors should closely monitor market movements and news that could potentially impact ETH’s price.
- Consider BTC’s Bearish Skew: Investors should take into account the bearish skew in BTC’s volatility smile when making investment decisions, as it indicates a higher probability of price declines in the near term.
- Assess ETH’s Neutral or Call Skew: The neutral or call skew in ETH’s volatility smile suggests a balanced or slightly bullish outlook for ETH prices, which could influence investment strategies.
- Track Futures Implied Yield: The recovery in futures implied yield could signal a return to normal yield levels, which could impact investment decisions.
- Understand Derivatives Sentiment: The charging of short positions in BTC and ETH funding rates indicates a bearish sentiment in the market, which could influence investment strategies.
