.png)
Last week’s bullish price momentum concluded with an inevitable pullback, as BTC dropped from the week’s high of $35,000 and tested $33,500. ETH made a similar move, dropping from a high of $1,867 to $1,745. The upward trend in Bitcoin continued over the weekend, with prices climbing to $34,000 on Saturday and testing $34,750 on Sunday. ETH followed a similar path, reaching $1,800 during the weekend but eventually dropping and stabilizing at $1,780.
Turning to the traditional financial markets (TradFi), S&P futures displayed extreme weakness, closing the week at $4,136.5, which was nearly $150 lower than the weekly high of $4,290. While crypto and the S&P initially seemed to decouple in terms of correlation recently, the hourly correlation has re-emerged as both assets started moving in similar directions again. In the coming weeks it will be interesting to monitor both markets for any potential divergences, as weakness in equities and ETF speculation-driven bullish sentiment in Bitcoin will both likely continue.
In the options market, implied volatility slowed down as realized volatility temporarily settled. The week started with an enormous shift in the entire implied volatility surface, as vols jumped 15 - 20 points up to ~60 vol in response to the bullish price action seen. Towards the end of the week, as realized volatility tapered down, the surface readjusted. As always, front end (near dated) volatility reacted fastest to downwards retracement and tapering RV. At-the-money volatility term structure now starts and 57.5, dips down to 53 vol for November, and increases back up to 56.5, 57.6, and 57.4 for December, March, and June expiries, respectively.
ETH's volatility structure differs somewhat from Bitcoin's. Front-end volatilities start at 49, dip to 47.6 in November, and then rise to 52.8 for March 2024. The steep term structure between November and March in ETH presents opportunities for short calendar spread plays. Call side skew remains evident in both markets, driving volumes in vertical spreads and risk reversals, as observed in previous weeks. Lowered near - mid term volatility in both markets is to be expected as many traders are likely selling the high volatility levels after this recent jump.
This week Bitcoin and ETH continue to show heightened volumes on combo spreads on Deribit / Paradigm. Vertical and horizontal spreads continue to dominate volume as steep term structure and high call side skew are evident. BTC Deribit block trade data shows that the biggest volumes were in risk reversals, call diagonal spreads, and call spreads. Ethereum shows the highest volumes in strangles / straddles, risk reversals, and call spreads.
BTC Combo Spread Volumes:
ETH Combo Spread Volumes:
***Data and insights as of October 30th, 2023 12:00:00 UTC
This research is for informational use only. This is not investment advice. Other than disclosures relating to SDM Financial this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates, and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate.
Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of crypto assets may rise or fall because of changes in the broad market or changes in a company's financial condition, sometimes rapidly or unpredictably. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.
The information on which the analysis is based has been obtained from sources believed to be reliable such as, for example, the company’s financial statements filed with a regulator, company website, company white paper, pitchbook and any other sources. While SDM Financial has obtained data, statistics, and information from sources it believes to be reliable, it does not perform an audit or seek independent verification of any of the data, statistics, and information it receives.
Unless otherwise provided in a separate agreement, SDM Financial does not represent that the report contents meet all of the presentation and/or disclosure standards applicable in the jurisdiction the recipient is located. SDM Financial and their officers, directors and employees shall not be responsible or liable for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses, or opinions within the report.
Crypto and/or digital currencies involve substantial risk, are speculative in nature and may not perform as expected. Many digital currency platforms are not subject to regulatory supervision, unlike regulated exchanges. Some platforms may commingle customer assets in shared accounts and provide inadequate custody, which may affect whether or how investors can withdraw their currency and/or subject them to money laundering. Digital currencies may be vulnerable to hacks and cyber fraud as well as significant volatility and price swings.
.jpg)
