The report discusses the divergence between the skews of Bitcoin’s (BTC) and Ethereum’s (ETH) volatility smiles towards out-of-the-money (OTM) calls or puts. This divergence has become more pronounced following the news of BlackRock’s application to the SEC for a Bitcoin spot ETF. Bitcoin option markets now price the implied volatility of upside and downside protection at much closer levels than Ethereum’s. This is largely due to an underperformance by Ethereum calls relative to both its own puts and to Bitcoin calls. Both assets continue to price OTM puts at a higher implied volatility than similarly OTM calls.
- Bitcoin’s skew is less pronounced: Bitcoin’s skew is less pronounced at short and long tenors, with 2- and 3- month tenors reporting the strongest preference for downside protection.
- Ethereum’s options market is more pessimistic: Ethereum’s options market is pricing for a much more pessimistic performance than Bitcoin’s, particularly in the short term.
- Implied volatility of OTM calls and puts: The implied vols of Bitcoin OTM calls and puts have converged slightly, resulting in its reduction in skew towards puts following the bullish news of BlackRock’s ETF application.