Cumberland is commenting on the recent volatility and potential opportunities to take advantage of it.
For further information about Cumberland, please visit Cumberland website here.
As we commented many times before (E.g. Jan 3 commentary), the BTC vol to ETH vol ratio is something we watch very closely. We had recommended shorting BTC vol and buying ETH vol as the ratio had reached 84% for the 50D 31 March expiries and 85% for the 30 June expiries. It even stretched to over 90% at the end of January. This was beyond the high end of its normal range of ~60% to 85%, and had far exceeded the range for realized relative vol ratio. Given that ETH is a higher beta asset, we felt that ETH vol was undervalued relative to BTC vol, and would outperform on a forward going basis.
Post SEC news on cracking down of Kraken’s ETH staking services in the US, ETH had reacted much more negatively, sending the ratio back down to 78% & 79% respectively for the March and June expiries. While it’s not possible to foresee what surprising news might cause crypto markets to react, it is possible to conclude that over the long run ETH should react more violently to both good and bad news relative to BTC.
Disclaimer
The information (“Information”) provided by Cumberland DRW LLC and its affiliated or related companies (collectively, “Cumberland”), either in this document or otherwise, is for informational purposes only and is provided without charge. Cumberland is a principal trading firm; it is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances, or requirements of any person, and it should not be the basis for making any investment or transaction decision. THE INFORMATION IS NOT A RECOMMENDATION TO ENGAGE IN ANY TRANSACTION.
If any person elects to enter into transactions with Cumberland, whether as a result of the Information or otherwise, Cumberland will enter into such transactions as principal only and will act solely in its own best interests, which may be adverse to the interests of such person. Before entering into any such transaction, you should conduct your own research and obtain your own advice as to whether the transaction is appropriate for your specific circumstances. In addition, any person wishing to enter into transactions with Cumberland must satisfy Cumberland’s eligibility requirements.
Cumberland may be subject to certain conflicts of interest in connection with the provision of the Information. For example, Cumberland may, but does not necessarily, hold or control positions in the cryptoasset(s) discussed in the Information, and transactions entered into by Cumberland could affect the relevant markets in ways that are adverse to a counterparty of Cumberland. Cumberland may engage in transactions in a manner inconsistent with the views expressed in the Information.
Cumberland makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness, or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. Cumberland undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The virtual currency industry is subject to a range of risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or cryptoassets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products, or cryptoassets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. Investing in virtual currencies involves significant risks and is not appropriate for many investors, including those without significant investment experience and capacity to assume significant risks.
