Volatility Weekly

Volatility Update, 11/10/23

BitOoda Crypto Market Report

Michael Tauckus
Key Takeaway #1

Markets had calmed a bit after a volatile end to October, but are on the upswing again after the large moves to end the week.

Key Takeaway #2

Implied Volatility has followed suit and is trading in the high 50% to low 60 % levels in both majors.

Key Takeaway #3

ETH Implied Vol made a huge weekly jump to regain a premium to BTC.

Key Takeaway #4

The absence of the ETH call overwriter has allowed ETH IV to catch up to that of BTC

Following a pause in the market rally last week, it seemed that the cryptocurrency markets were establishing a new trading range. Multiple attempts to push through recent highs failed early in the week, and implied vols softened as the markets retraced. However, despite this decline in implied volatility (IV), the direction of option flows remained bullish. There was persistent buying activity in November and December calls for both products, accompanied by substantial call spread purchases in the March ETH contract.

The resilience of the markets and the prevailing "buy the dip" mentality proved robust, leading to a breakout through resistance to new yearly highs on Wednesday night and into Thursday morning, with Bitcoin (BTC) taking the lead. This surge in spot price, reaching as high as $38,500, appeared to be driven by a short squeeze in BTC. Given that dealers were short options in this range, offers widened, and the demand for calls pushed implied volatility to as high as 65% in the front end. Some profit-taking occurred in the form of call spread selling, with traders strategically rolling their positions to higher strike prices. Initially, Ethereum (ETH) lagged behind, and the ETH/BTC spread dropped to as low as 0.051. However, this dynamic changed significantly mid-day Thursday with the news of a filing by Blackrock for a spot ETH ETF. The spot price of ETH surged, swiftly driving the spread to 0.057 within minutes. With the ETH call overwriter absent from the market, buyers of ETH options drove implied volatility above that of BTC across all expirations.

This marked a notable reversal in the recent trend of BTC IV premium. Whether this remains in place or was a function of short covering remains to be seen and could present some strategic options plays heading into year end. Worth noting is the continued steepening of skew in both major cryptocurrencies, with 25-delta calls trading as much as 10% over at-the-money options, presenting excellent hedging opportunities. The anticipation of potential spot ETF approvals appears to be a key driver of substantial institutional adoption. Notably, the Chicago Mercantile Exchange (CME) has now claimed the top position in Bitcoin futures open interest. Concurrently, there is growing interest in derivatives on the exchange, reflecting an expanding trend in the market. As noted, now is an opportune time to leverage the dynamics within the options market for hedging purposes. Please reach out to discuss the most suitable strategies that align with your firm’s needs.

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Following a pause in the market rally last week, it seemed that the cryptocurrency markets were establishing a new trading range. Multiple attempts to push through recent highs failed early in the week, and implied vols softened as the markets retraced. However, despite this decline in implied volatility (IV), the direction of option flows remained bullish. There was persistent buying activity in November and December calls for both products, accompanied by substantial call spread purchases in the March ETH contract.

The resilience of the markets and the prevailing "buy the dip" mentality proved robust, leading to a breakout through resistance to new yearly highs on Wednesday night and into Thursday morning, with Bitcoin (BTC) taking the lead. This surge in spot price, reaching as high as $38,500, appeared to be driven by a short squeeze in BTC. Given that dealers were short options in this range, offers widened, and the demand for calls pushed implied volatility to as high as 65% in the front end. Some profit-taking occurred in the form of call spread selling, with traders strategically rolling their positions to higher strike prices. Initially, Ethereum (ETH) lagged behind, and the ETH/BTC spread dropped to as low as 0.051. However, this dynamic changed significantly mid-day Thursday with the news of a filing by Blackrock for a spot ETH ETF. The spot price of ETH surged, swiftly driving the spread to 0.057 within minutes. With the ETH call overwriter absent from the market, buyers of ETH options drove implied volatility above that of BTC across all expirations. This marked a notable reversal in the recent trend of BTC IV premium. Whether this remains in place or was a function of short covering remains to be seen and could present some strategic options plays heading into year end. Worth noting is the continued steepening of skew in both major cryptocurrencies, with 25-delta calls trading as much as 10% over at-the-money options, presenting excellent hedging opportunities.

The anticipation of potential spot ETF approvals appears to be a key driver of substantial institutional adoption. Notably, the Chicago Mercantile Exchange (CME) has now claimed the top position in Bitcoin futures open interest. Concurrently, there is growing interest in derivatives on the exchange, reflecting an expanding trend in the market. As noted, now is an opportune time to leverage the dynamics within the options market for hedging purposes. Please reach out to discuss the most suitable strategies that align with your firm’s needs.

Notable Headlines

Bitcoin Fund Holdings Hit All-Time High as Spot ETF Excitement Entices Crypto Investors     LINK
BlackRock filing means 'nuclear winter for everybody who doubted Ethereum,' analyst says  LINK
Bitcoin Tops $37K for First Time Since May 2022 as Short Squeeze Bumps Prices Amid BTC ETF Optimism   LINK
Bitcoin Mining Revenue Hits Yearly High Amid ETF-Fuelled Rally    LINK
FTX Collapse Driving US Push to Widen Protections for Crypto Futures Traders   LINK
Iris Energy is betting on greening the grid with Bitcoin mining   LINK
Bitcoin ‘Terminal Price’ hints next BTC all-time high is at least $110K   LINK
Crypto lender Celsius Network cleared to exit bankruptcy   LINK
BlackRock’s spot Ethereum ETF plan is confirmed after Nasdaq filing   LINK
SEC chair Gary Gensler says an FTX reboot could happen if it follows the law   LINK

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda 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 is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda 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. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. 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. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

Following a pause in the market rally last week, it seemed that the cryptocurrency markets were establishing a new trading range. Multiple attempts to push through recent highs failed early in the week, and implied vols softened as the markets retraced. However, despite this decline in implied volatility (IV), the direction of option flows remained bullish. There was persistent buying activity in November and December calls for both products, accompanied by substantial call spread purchases in the March ETH contract.

The resilience of the markets and the prevailing "buy the dip" mentality proved robust, leading to a breakout through resistance to new yearly highs on Wednesday night and into Thursday morning, with Bitcoin (BTC) taking the lead. This surge in spot price, reaching as high as $38,500, appeared to be driven by a short squeeze in BTC. Given that dealers were short options in this range, offers widened, and the demand for calls pushed implied volatility to as high as 65% in the front end. Some profit-taking occurred in the form of call spread selling, with traders strategically rolling their positions to higher strike prices. Initially, Ethereum (ETH) lagged behind, and the ETH/BTC spread dropped to as low as 0.051. However, this dynamic changed significantly mid-day Thursday with the news of a filing by Blackrock for a spot ETH ETF. The spot price of ETH surged, swiftly driving the spread to 0.057 within minutes. With the ETH call overwriter absent from the market, buyers of ETH options drove implied volatility above that of BTC across all expirations. This marked a notable reversal in the recent trend of BTC IV premium. Whether this remains in place or was a function of short covering remains to be seen and could present some strategic options plays heading into year end. Worth noting is the continued steepening of skew in both major cryptocurrencies, with 25-delta calls trading as much as 10% over at-the-money options, presenting excellent hedging opportunities.

The anticipation of potential spot ETF approvals appears to be a key driver of substantial institutional adoption. Notably, the Chicago Mercantile Exchange (CME) has now claimed the top position in Bitcoin futures open interest. Concurrently, there is growing interest in derivatives on the exchange, reflecting an expanding trend in the market. As noted, now is an opportune time to leverage the dynamics within the options market for hedging purposes. Please reach out to discuss the most suitable strategies that align with your firm’s needs.

Notable Headlines

Bitcoin Fund Holdings Hit All-Time High as Spot ETF Excitement Entices Crypto Investors     LINK
BlackRock filing means 'nuclear winter for everybody who doubted Ethereum,' analyst says  LINK
Bitcoin Tops $37K for First Time Since May 2022 as Short Squeeze Bumps Prices Amid BTC ETF Optimism   LINK
Bitcoin Mining Revenue Hits Yearly High Amid ETF-Fuelled Rally    LINK
FTX Collapse Driving US Push to Widen Protections for Crypto Futures Traders   LINK
Iris Energy is betting on greening the grid with Bitcoin mining   LINK
Bitcoin ‘Terminal Price’ hints next BTC all-time high is at least $110K   LINK
Crypto lender Celsius Network cleared to exit bankruptcy   LINK
BlackRock’s spot Ethereum ETF plan is confirmed after Nasdaq filing   LINK
SEC chair Gary Gensler says an FTX reboot could happen if it follows the law   LINK

Disclosures

Purpose This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda .io. Analyst Certification Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships. Conflicts of Interest This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation. General Disclosures Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or through http on or ://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda 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 is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda 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. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information. 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. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. All derivatives brokerage is conducted by Ooda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. BitOoda Technologies, LLC is a member of FINRA. “BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc. Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.

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