Let’s give it a go & get you caught up w/this week’s Crypto Roundup☟
Despite significant 5-6% drop last Thursday on US regulatory crackdown reports, RV has been relatively subdued & drifted lower WoW.
#ImpliedVolatility, on the other hand, spiked when spot started to look weak and was testing the week’s lows.
As a result, positive carry exploded to 17 vols, likely not sustainable and only holding because of yesterday’s CPI vol event.
With BTC and ETH sitting just above key support levels of 21k and 1400, we suspect RV will likely bounce from here.
Term structures started flattening back from contango as gamma caught a bid before CPI.
ETH/BTC vol spread shifting even higher to 15 vols as ETH gives back its recent outperformance.
The better RV in ETH has persisted on potential for an upside catalyst in the Shanghai upgrade.
But now we have a fresh downside catalyst with all of the recent regulatory crackdown.
Little change in ETH skew this week.
But BTC has continued to move more towards puts – catching up to ETH skew levels.
We’ve mentioned that we feel long-dated skew in BTC being for calls is not justified in our opinion, but a very slight call skew still remains in the back end.
The short-dated skew is deeper for puts as recent bearish price action and newsflow have spooked markets.
Increasing near-term hedging demand.
#BTC Options Flows
Volumes came down this week as spot continued to fade on
Upside calls were closed out in Feb-Mar expiries in the 24-30k range.
Put protection bought in the form of 17Feb 21.5k/21k put spreads and 31Mar 21k puts outright.
Largest clip was a Mar23/Sep23 diagonal call calendar.
#ETH Options Flows
Started the week bullish as short-dated (Feb) 1700 and 1800 calls were being used to chase the potential break higher.
April 1400/2400 bullish risk reversal traded, taking advantage of put skew to get long.
As spot rolled over, flows turned more bearish.
#Bitcoin #Gamma Positioning
BTC dealer gamma is very spot sensitive still.
The main long strike looks to be 24Feb 21k, but there are plenty of short upside strikes in Feb all the way up to 25k.
We see this as fuel for a squeeze if the news flow can improve.
#Ethereum #Gamma Positioning
ETH positioning quite neutral here.
But dealers appear to be short skew and long calendars.
This means the gamma profile is less explosive to the upside, unlike BTC.
Suggests the more significant move in ETH should be on the downside, as reflected in skew pricing.
And that’s a wrap on this week’s Crypro Roundup!
I’m incredibly grateful you made it this far
If you want more details, go watch yesterday’s Crypto Insight video on the Options Insight YouTube Channel! (link coming in follow-up tweet)
Let me know your thoughts or questions about anything above in the replies!