Research Summary
The report provides a comprehensive analysis of the crypto derivatives markets, focusing on the performance of Bitcoin (BTC) and Ethereum (ETH). It covers aspects such as spot prices, futures implied yield, volatility, derivatives sentiment, and perpetual swap funding rates. The report also provides insights into the performance of these cryptocurrencies across different exchanges.
Key Takeaways
Spot Prices and Volatility
- Spot Price Recovery: Both BTC and ETH have seen a significant recovery in their spot prices over the past week. This recovery has led to an increase in implied volatility, particularly in short-tenor options.
- Volatility Premium: ETH continues to hold a volatility premium over BTC, a trend that has been consistent for several months. However, its short-tenors did not push as close to the levels at the back end of the term structure, resulting in a slightly steeper term structure.
Futures and Perpetual Swap Funding Rates
- Futures Implied Yield: The recovery in spot prices has led to a return to double-digit yields implied by both BTC and ETH futures markets. However, only BTC has seen a similar sentiment expressed by its perpetual swap funding rates.
- Perpetual Swap Funding Rates: BTC has seen a consistently positive rate paid from longs to shorts over the past week, spiking during the spot recovery. ETH’s funding rate, on the other hand, remains much flatter despite its outperformance in the spot recovery.
Options and Volatility by Exchange
- Options: The term structure for BTC options has flattened significantly as short-tenor optionality has rallied back above 50%. ETH volatility remains above BTC’s across the term structure, but front-end vols did not rally as hard.
- Volatility by Exchange: The report provides a detailed analysis of volatility for both BTC and ETH across different exchanges, including Deribit, Bybit, and Lyra.
Market Composite Volatility Surface and Volatility Smiles
- Market Composite Volatility Surface: The report provides snapshots of the market composite volatility surface for both BTC and ETH, providing insights into their performance across different tenors.
- Volatility Smiles: The report also provides snapshots of the volatility smiles for BTC and ETH across different tenors and expiries, providing insights into the implied volatility across different strike prices.
Actionable Insights
- Monitor Spot Price Movements: Given the significant recovery in spot prices for both BTC and ETH, it would be prudent to closely monitor these movements as they can have a significant impact on implied volatility and futures implied yield.
- Assess Volatility Premium: With ETH holding a volatility premium over BTC, it may be worth assessing the factors contributing to this premium and how it might impact future performance.
- Consider Exchange Differences: The report highlights differences in volatility across different exchanges. Understanding these differences can provide valuable insights for strategic decision-making.
