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Crypto Derivatives 2 July 2024

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Keep up with the latest in crypto market commentary as we share the insights from our institutional research partners.

In this edition, we share the latest crypto derivatives weekly from Block Scholes.

As spot prices trade at their lowest levels since early May, we see a stark divergence in the sentiment priced in by BTC and ETH options markets. ETH continues to trade with a 10-15 volatility premium across the term structure, and the most recent move lower in spot prices has seen BTC vol smile skew turned decidedly bearish at short tenors while ETH smiles skew neutral or towards calls at all tenors. While the fall in future-implied yields has recovered to last weeks levels, funding rates in the two majors have repeatedly charged short positions since the 9th June -- a phenomenon that we observe across perpetual-swap markets.

Futures Implied Yield, 1-Month Tenor

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ATM Implied Volatility, 1-Month Tenor

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Crypto Senti-Meter Index

BTC Sentiment

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ETH Sentiment

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Futures

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BTC Annualised Yields

Yields at short-dated expiries have recovered to the levels of longer-dated expiries, compressing the term structure

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ETH Annualised Yields

Yields follow BTC’s upwards to trade in a tight range across the term structure across both markets

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Perpetual Swap Funding Rates

BTC Funding Rate

A recovery in sentiment sees a persistent funding rate paid by long positions for leveraged exposure through the contract

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ETH Funding Rate

Funding rates are more consistently positive in ETH than BTC, owing to excess bullishness that we have seen since the recovery in ETF approval chances in May

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BTC Options

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BTC SVI ATM Implied Volatility

Volatility levels continues in broadly the same monthly range, with shorter tenor vols falling in the last 24H

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BTC 25-Delta Risk Reversal

We see a distinct upward trend in short tenor smiles back towards a neutral skew

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ETH Options

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ETH SVI ATM Implied Volatility

ETH sees the same rangebound movements at a 10-15 point premium above BTC’s levels

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ETH 25-Delta Risk Reversal

BTC’s upward trend is replicated in ETH’s markets at short tenors, pushing further towards the bullish call skew seen in longer tenors

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Volatility by Exchange

BTC, 1-Month Tenor, SVI Calibration

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ETH, 1-Month Tenor, SVI Calibration

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Put-Call Skew by Exchange

BTC, 1-Month Tenor, 25-Delta SVI Calibration

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ETH, 1-Month Tenor, 25-Delta SVI Calibration

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Market Composite Volatility Surface

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Listed Expiry Volatility Smiles

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Cross-Exchange Volatility Smiles

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Constant Maturity Volatility Smiles

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The cryptocurrency markets are highly volatile and unpredictable, subject to substantial market risks including significant price fluctuations. The strategies, opinions, and analyses included are based on information available at the time of writing and may change without notice. They are also based on certain assumptions and historical data that may not be accurate or applicable in the future. Therefore, reliance on this report for the purpose of making investment decisions is at your own risk.

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Disclaimer
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