Crypto Derivatives 14th May 24

Volatility has gradually risen across the term structure as BTC trades near its range lows of $60K, but has still not deviated from its longer term downward trend. ETH continues to trade 5-7 vols higher than BTC. Despite a strong start to the month where skew recovered following the spot sell-off which saw investors purchase OTM puts for downside protection, the skew at short-dated tenors has traded with some uncertainty recently. ETH’s skew continues to trade lower than BTC’s, indicating more bearish positioning. Leverage - indicated by perpetual swap funding rates and futures-implied yields - has increased, particularly at short-dated tenors which have risen beyond longer-dated tenors, indicating demand for leveraged long exposure as both majors sit at precarious levels.

Crypto

Derivatives

Futures Implied Yield, 1-Month Tenor

ATM Implied Volatility, 1-Month Tenor

Futures

BTC Annualised Yields

Yields at short-dated tenors rose beyond longer-dated tenors as BTC bounced at $60K.

ETH Annualised Yields

The increase in yields is far less prominent compared to BTC, continuing to trade lower at short-dated tenors.

Perpetual Swap Funding Rates

BTC Funding Rate

Continued to trade near zero throughout the week, but rose sharply as BTC bounced at $60K, indicating a sudden demand for leveraged long exposure.

ETH Funding Rate

Has traded higher than BTC over the past week, particularly in the more illiquid USDC-margined token.

BTC Options

BTC SVI ATM Implied Volatility

Vol has been rising steadily within the past week, where the front-end of the term structure briefly became inverted as vol at short-dated tenors spiked.