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Last Updated:  
December 4, 2024
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Crypto Markets Daily Nov 19 2024

Derivatives markets retain the bullish trend of the past weeks. Spot yields are almost reaching the positive highs of the past week, skew levels and funding rates remain strongly positive. The term structure of implied volatility is still inverted – but not as extremely as during the pre-election frenzy. The level of inversion has followed spot upward frequently since the election. The BTC Spot ETFs recorded inflows of $254.8 million yesterday, as the SEC approved the listing of options settling to BTC Spot ETFs – first BlackRock’s IBIT on the Nasdaq exchange, and then others on the NYSE and CBOE respectively. This isn’t the first US offering of crypto options – CME currently offer options on BTC and ETH that settle to the futures on their same market. However, we expect that it will open the floodgates to a growing interest in structured products, and for those structured products to have an impact on the supply and demand of volatility in existing crypto options markets.

The ETF Option

Derivatives markets retain the bullish trend of the past weeks. Spot yields are almost reaching the positive highs of the past week, skew levels and funding rates remain strongly positive. The term structure of implied volatility is still inverted – but not as extremely as during the pre-election frenzy. The level of inversion has followed spot upward frequently since the election.

Figure 1. BTC at-the-money implied volatility at several constant tenors . Source: Block Scholes

BTC is still underperforming its returns path post-halving compared to previous cycles. However, this cycle’s reduced supply effect from the halving is also being met by aggressive institutional interest via the Spot ETFs (averaging $123M inflows per day in 2024 so far) and corporations like MicroStrategy, which further add to the potential supply squeeze.

Figure 2. Post-halving performance of BTC spot price after each historical event. Source: Bloomberg, Block Scholes

MicroStrategy, the largest corporate holder of Bitcoin, announced an intended plan to raise $1.75 billion through 0% convertible bonds due in 2029 to buy more bitcoins. The company also purchased an additional 51,780 Bitcoin on Nov 18, bringing its current total BTC holdings to 331,200.

The BTC Spot ETFs recorded inflows of $254.8 million yesterday, as the SEC approved the listing of options settling to BTC Spot ETFs – first BlackRock’s IBIT on the Nasdaq exchange, and then others on the NYSE and CBOE respectively. This isn’t the first US offering of crypto options – CME currently offer options on BTC and ETH that settle to the futures on their same market. However, we expect that it will open the floodgates to a growing interest in structured products, and for those structured products to have an impact on the supply and demand of volatility in existing crypto options markets.

While it followed the ETF news, BTC’s rally on Tuesday has coincided with a rebound in gold prices – after cutting its correlation to it on election night as BTC rallied. The metal’s rally is partially attributed to the pause in the dollar rally, as well as increased uncertainty around the Russia-Ukraine conflict. Gold prices have been dropping since President Trump’s election victory – largely due to the anticipation of Trump’s policies causing a stronger dollar and the event risk uncertainty having passed.

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The ETF Option

Derivatives markets retain the bullish trend of the past weeks. Spot yields are almost reaching the positive highs of the past week, skew levels and funding rates remain strongly positive. The term structure of implied volatility is still inverted – but not as extremely as during the pre-election frenzy. The level of inversion has followed spot upward frequently since the election.

Figure 1. BTC at-the-money implied volatility at several constant tenors . Source: Block Scholes

BTC is still underperforming its returns path post-halving compared to previous cycles. However, this cycle’s reduced supply effect from the halving is also being met by aggressive institutional interest via the Spot ETFs (averaging $123M inflows per day in 2024 so far) and corporations like MicroStrategy, which further add to the potential supply squeeze.

Figure 2. Post-halving performance of BTC spot price after each historical event. Source: Bloomberg, Block Scholes

The ETF Option

Derivatives markets retain the bullish trend of the past weeks. Spot yields are almost reaching the positive highs of the past week, skew levels and funding rates remain strongly positive. The term structure of implied volatility is still inverted – but not as extremely as during the pre-election frenzy. The level of inversion has followed spot upward frequently since the election.

Figure 1. BTC at-the-money implied volatility at several constant tenors . Source: Block Scholes

BTC is still underperforming its returns path post-halving compared to previous cycles. However, this cycle’s reduced supply effect from the halving is also being met by aggressive institutional interest via the Spot ETFs (averaging $123M inflows per day in 2024 so far) and corporations like MicroStrategy, which further add to the potential supply squeeze.

Figure 2. Post-halving performance of BTC spot price after each historical event. Source: Bloomberg, Block Scholes