Crypto Derivatives: Analytics Report – Week 44

Weekly recap of the crypto derivatives markets by BlockScholes.

Key Insights:

The past week has been characterised by a modest recovery in risk-on appetite as BTC and ETH trade 5% and 6% higher, respectively. That has encouraged a slight pick up in derivatives market, where sentiment is not excessively euphoric, though far less bearish than earlier in the month. BTC and ETH’s short-tenor volatility smile skew has steepened to the upside, with much of the bearish sentiment being priced out over the past week. ETH’s 7-day put-call skew still trades with a slight put bias, though skew for similar-dated BTC options is modestly positive. ATM implied volatility levels remain elevated relative to pre-October 10 levels, indicating continued demand for options exposure. The recent rebound in risk sentiment came amidst signs of reduced trade tensions between the two largest economies in the world – the US and China. Trade negotiators from both sides reached a preliminary consensus and “a very positive framework” for President Trump and President Xi to discuss in their Thursday face-to-face meeting later this week.

Futures Implied Yields

1-Month Tenor ATM Implied Volatility

Perpetual Swap Funding Rate

BTC FUNDING RATE – Perpetual swap funding rates show a slight preference for leveraged upside exposure, matching the similarly modest skew seen in short-tenor BTC volatility smiles.

ETH FUNDING RATE – ETH funding rates jumped to their highest levels since the start of the month earlier this week, as spot price rallied past $4,200.

Futures Implied Yields

BTC Futures Implied Yields – Short-dated futures contracts no longer trade below spot price as was the case last week; a signal of recovering sentiment.

ETH Futures Implied Yields – ETH futures traders are not currently willing to pay as high a premium for leveraged upside exposure as BTC traders.

BTC Options

BTC SVI ATM IMPLIED VOLATILITY – Demand for optionality still remains elevated above pre-October 10 levels where ATM vol traded closer to 30%.

BTC 25-Delta Risk Reversal – Short-tenor smile skews have steepened to the upside over the past week and trade at modestly positive-to-neutral levels.

ETH Options

ETH SVI ATM IMPLIED VOLATILITY – After two major inversions in the month, ETH ATM vol currently trades between 65-68%.

ETH 25-Delta Risk Reversal – Longer dated ETH options maintain their bias towards calls, though ETH traders expect more downside in the short-term.

Market Composite Volatility Surface

CeFi COMPOSITE – BTC SVI – 9:00 UTC Snapshot.

CeFi COMPOSITE – ETH SVI – 9:00 UTC Snapshot.

Listed Expiry Volatility Smiles

BTC 28-NOV EXPIRY – 9:00 UTC Snapshot.

ETH 28-NOV EXPIRY – 9:00 UTC Snapshot.

Cross-Exchange Volatility Smiles

BTC SVI, 30D TENOR – 9:00 UTC Snapshot.

ETH SVI, 30D TENOR – 9:00 UTC Snapshot.

Constant Maturity Volatility Smiles

BTC SVI, 30D TENOR – 9:00 UTC Snapshot.

ETH SVI, 30D TENOR – 9:00 UTC Snapshot.

Thanks to Andrew Melville and Thahbib Rahman, Block Scholes