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In this edition, we share the latest crypto derivatives weekly from Block Scholes.
The derivatives market has recently behaved in contrast to what we observed post-election. BTC spot price has repeatedly broken all-time highs, now reaching $107K, but its short dated implied volatility has been trending lower, decreasing sharply after the rally in line with drifting realized volatility. Skew initially indicated increased interest in OTM puts as volatility was falling, but it has since returned to positive territory, with OTM calls now trading at a volatility premium again. The period of strong inversions coinciding with spot rallies appears to have come to an end, as traders have not yet reopened overly leveraged positions during drastic spot price moves. Sentiment has slowed, with futures implied yields being the only signal that continues to ramp up for short tenors.
ATM Implied Volatility, 1-Month Tenor
BTC Options
BTC SVI ATM Implied Volatility
The term structure of implied volatility has steepened after the rally that brought BTC to a new ATH.
BTC 25-Delta Risk Reversal
Skew levels have been on a decline across tenors, with short-tenors dipping negative briefly after the rally.
ETH Options
ETH SVI ATM Implied Volatility
ETH's implied volatility term structure has steepened, mirroring BTC’s movements.
ETH 25-Delta Risk Reversal
Short-tenor smiles have lost much of their bullish skew, with short tenors assigning a volatility premium to OTM puts.
Market Composite Volatility Surface
Listed Expiry Volatility Smiles
Constant Maturity Volatility Smiles
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