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BTC and ETH continued to demonstrate strong price action towards the end of last week. The beginning of the previous week exhibited volatile price actions, culminating in a significant surge to $36,000 for BTC and $1,860 for ETH, only to retrace back to previous levels of $34,500 and $1,803, respectively. Price fluctuations continued with good volatility, though no decisive trend was apparent until Saturday, when both BTC and ETH experienced an overnight increase of approximately 2%. On Sunday night, there was a momentary setback, with BTC and ETH rejecting prices of $35,500 and $1,910. However, these levels were eventually breached as the New York market opened this morning. Notably, futures basis curves have remained robust, with near-dated expiry futures trading at annualized bases of 9% to 15% for Bitcoin and 6% to 13% for Ethereum.
Last week proved to be a highly favorable one for the S&P, characterized by a prolonged bullish trend that commenced last Sunday with futures opening at $4,148 and closing on Friday at $4,378.5. It marked one of the most impressive weeks the S&P has witnessed in recent months, boasting an almost 6% increase. This surge had a notable impact on the VIX, which plummeted from $22 to $15. This drop is not unexpected, given that the VIX represents the 30-day calculated implied volatility of SPY (a synthetic variance swap), and a negative spot volatility correlation dynamic is a well-established statistical relationship within the equities market. 20-day moving correlation of BTC and SPY returns remains negative at around -30%. It should be noted that running correlation is not truly a significant nor appropriate measure for dependance, but should only be used as a rough heuristic to gauge short term relationships / comovement.
Options markets continue to show robust implied volatility levels in Bitcoin and Ethereum. Mid to late expiry BTC implied volatility levels lifted over the week about 3 - 5 vol, depending on the expiry. Specifically, December, March, and June vols rose from 55, 57.5, and 57 to 57.75, 62.45, and 61.6, respectively. ETH at-the-money volatilities for these same expiries moved to similar levels but witnessed a more substantial magnitude jump, transitioning from 49.5, 51.7, and 52.4 to 56.9, 62, and 61.15. Interestingly, ETH and BTC volatilities have now converged to similar levels, whereas previously, there was a consistent 3-6 point gap between BTC and ETH at-the-money volatilities. Volatility skew for both assets remains highly positive, albeit trending in different directions; ETH's average vol skew has been on an upward trajectory since last week, reaching 10, while BTC's vol skew reached 10 last Thursday and is now trending downwards back to 8.
Digging Deeper - Volume Analytics
This week Bitcoin combo spread volumes revert back to average levels on Deribit / Paradigm, however, ETH call spread volume was absolutely massive with over 50,000 contracts traded. This is an interesting occurrence, since over the last week ETH vol levels have finally caught up to BTC’s, and ETH call side skew surpasses BTC’s. BTC Deribit block trade data shows that the biggest volumes were in call spreads, strangles / straddles, and put spreads. Ethereum shows the highest volumes in call spreads, strangles / straddles, and call diagonal spreads.
BTC Combo Spread Volumes:
ETH Combo Spread Volumes:
***Data and insights as of Novermber 1st, 2023 12:00:00 UTC
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