BTC Nears Highs, ETH Surges: What Flows, Vols, and Skew Are Signaling

Bitcoin Steady On Flows, Policy, and Macro Tailwinds

Bitcoin is nearing all-time highs again, supported by renewed investor interest and a favorable macro environment.

In April, spot Bitcoin ETFs attracted nearly $3B in net inflows, with another $1.6B so far in May. CFTC data shows leveraged funds didn’t significantly increase short positions, indicating most flows were directional bets-not arbitrage.

On the policy front, momentum is growing. New Hampshire became the first U.S. state to pass a Strategic Bitcoin Reserve law, while 19 others are exploring similar bills. Arizona is advancing legislation on both crypto custody and strategic reserves.

At the federal level, the Senate blocked the GENIUS Act, a stablecoin regulation bill-but the crypto market shrugged it off. Risk appetite remains firm.

Macroeconomic signals are also supportive. Trump’s tariff revision is seen as pro-growth, lifting equities and the dollar while pushing down gold, the yen, and recession odds. Volatility has cooled, with the VIX now at its 12-month average.

Bottom line: Bitcoin is benefiting from rising institutional demand, political tailwinds, and a macro setup that favours risk assets. The positioning suggests investors are leaning bullish.

BTC passes the Vol baton to ETH

Bitcoin’s realized volatility climbed about 8 points as it broke back above 100k. Ethereum stole the show—realized vol surged to 90% as it jumped 30% in just two days.

BTC front-end implied vols drifted slightly lower, while ETH exploded 20 vols higher due to the sharp move.

BTC carry returned to neutral, but ETH carry turned deeply negative-gamma sellers were hit hard.

BTC’s move breached implied highs just once (at 100k), but ETH had multiple upside breaks. It looks like Bitcoin just handed off the momentum baton to Ethereum—time will tell if it lasts.

BTC Skew Term Structure Flattened Out Into Call Premium Again

As markets rallied, skew curves flattened, and call premiums returned.

Bitcoin skew sits around 2–3 vols across the curve, suggesting bullish flows targeting upside. Implied vol levels remain relatively cheap.

Ethereum skew shifted lower, with a mild lean toward puts-except at the front end. If ETH holds recent gains and breaks through the 2800 level, we could see a sustained call bid return. For now, the market remains cautious.

From a longer-term view, ETH still has ground to make up versus BTC.

Front End Vo Spreads Explode

ETH/BTC jumped 33% over the past week and is now testing key downtrend resistance at 0.025. Short-term vol spreads surged to 35 vols as ETH outperformed dramatically on realized vol.

Meanwhile, back-end vol spreads held steady around 15 vols and didn’t react much-supporting the view that long-term VEGA is likely a sell here.

Despite the big ETH move, skew has shifted further into put premium across short-dated expiries. That tells us the options market isn’t fully buying this rally-yet.

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BTC Skew Back into Call Premium Across the Curve

Skew is on the rise again, following a sharp rally that particularly invigorated the call side of Bitcoin. The entire term structure for BTC skew has reverted to favouring calls, exhibiting a 2 vol premium on the short end and escalating to roughly 8 vols for the more distant September 2024 expiry.

Ethereum, while also seeing a pivot towards calls, is experiencing a less pronounced shift. Short-term weeklies are showing a slight call premium. In contrast, the 1–3-month range favours puts by around 2 vols, transitioning back to a call premium in longer terms, almost matching BTC, with 7 vol call skew by September 2024.

A significant disparity in skew pricing between BTC and ETH is most apparent in the 1–3-month segment of the curve. This trend indicates market speculation that Bitcoin may see substantial relative gains, possibly due to anticipated ETF approval within this timeframe.

Option Flows And Dealer Gamma Positioning

Bitcoin trading volumes have decreased by approximately 10% over the past week. However, significant on-screen buying interest in December 2023 36k calls notably elevated upside implied volatilities. This activity drew in demand to buy December 2023 32k/37k call spreads and sell November 2023/December 2023 36k call calendars.

In contrast, Ethereum options saw a 40% volume increase this week, with calls experiencing substantial activity in both directions. The demand for December 2023 2000 calls positively impacted the call wing’s volatilities. The December 2023 1700 calls faced the expected selling pressure.

Regarding dealer gamma positioning in BTC, the past week has been relatively stable, with a temporary downturn as BTC dipped below 30k due to unfounded news. At present levels, the positioning seems more even, trending towards short beyond the 30k mark.

For ETH, dealer gamma is gradually returning to lower levels as some short positions for October 2023 begin to build on dealer portfolios. Should the cryptocurrency market rally and move beyond the significant November 2023 1650 and 1700 strikes, ETH’s gamma positioning is expected to become cleaner, potentially allowing spot ETH to have a stronger participation in a rally.

Strategy Compass: Where Does The Opportunity Lie?

We still like owning call or call spreads out in 2024 as it becomes increasingly apparent that the markets response to ETF approvals is not fully priced in and will likely bring more inflows into the space.

Crypto related stocks also look interesting as they have not been able to rally much from recent lows, making call spreads out to Jan24 look attractive in names like RIOT and MSTR.

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