Crypto Derivatives Market Pulse

Quick Takes: Spot – Volatility Dynamics

• BTC Holds Strong Above 65k Amid US Election Sentiment: Bitcoin recently broke $67k, as betting markets favor a Trump victory. Historically, BTC and ETH have performed well under Trump, who is seen as more crypto-friendly than Kamala Harris. Both BTC and ETH are up around 11% week-on-week.
• The U.S. election is a key catalyst, with options expiring near the election trading at a 10% premium, reflecting heightened market focus. Any shifts in polling or campaign narratives will likely impact spot prices.
• Positive sentiment in derivatives markets has strengthened, with volatility skewing toward calls (particularly for expiries above 3 months and more pronounced for ETH), indicating growing interest in upside exposure.
• Although pre-election implied volatility remains subdued, the sentiment points to expectations for a continued rise in spot prices. With Mt. Gox extending repayments to 2025 and October historically favoring crypto, momentum in the market continues to build.
• BTC realized volatility rose to 52% and ETH to 60%, while implied volatility lagged.
• ETH/BTC remains steady at its lows without breaking lower, as ETH volatility declines relative to BTC. This has narrowed the volatility spread to just 4% in the front-end/short-dated options.
• Spot Bitcoin ETFs saw exceptional inflows of $1.6 billion over the past week, while ETH lagged significantly, attracting only $38.4 million.

Volatility

BTC ATM Implied Volatility:

Volatility has reduced by 2% at the front end of the term structure but remains flat beyond the election.

BTC 25 Delta Call-Put Skew:

Skew has notably shifted toward calls across all tenors over the past week, with longer-term options reflecting an overall optimistic outlook for Bitcoin in Q4 and into Q1 2025.

ETH ATM Implied Volatility:

ETH's at-the-money implied volatility dropped by nearly 3% at the front end of the curve, while the rest of the curve remained flat.

ETH 25 Delta Call-Put Skew:

Implied volatility levels have generally moved sideways, despite a nearly 3% decline in ETH's at-the-money volatility for short-tenor options, while the rest of the curve remains flat.

Author: Carlo Accolla

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