Volatility Weekly

Volatility Update, 12/15/23

BitOoda Crypto Market Report

Michael Tauckus
Key Takeaway #1

Carry is defined as the difference between Implied Vol and Realized Vol. If carry is negative, the market is realizing more volatility than Implied Vol is suggesting. Positive carry indicates an anticipation that the market will move more in the future than currently realizing.

Key Takeaway #2

Carry in ETH has widened slightly, with implieds remaining close to unchanged and realized trending lower.

Key Takeaway #3

Carry in BTC decreased this week, as realized vol picked up with Monday’s significant selloff.

Key Takeaway #4

December continues to trade at a steep discount, as many anticipate a holiday lull and potential spot BTC ETF approvals in mid January.

While the bullish fever continues to fuel the crypto markets, an anticipated pullback materialized this week, triggered by a Senate-proposed bill addressing concerns of digital currency misuse. The market experienced an opening gap of approximately 5%, resulting in liquidations amounting to around $400 million. Options flows focused on front end put buying as well as short dated straddles. During pullbacks such as this, there’s generally been a good bit of buy-the-dip activity in the options markets. Interestingly, this was little evidence of this activity, suggesting potential near-term market exhaustion and trader caution leading up to year-end.

The remainder of the week witnessed choppy, consolidative trading, with markets recovering nearly 3% post the FOMC rate decision, where the Federal Reserve maintained interest rates within the 5.25%-5.50% range, aligning with expectations. Analysts' projections of up to four rate cuts in 2024 contributed to the market's upward momentum. Implied volatility exhibited a muted reaction, decreasing slightly over the week. Worth noting is the resilience in the Jan BTC contract with anticipation of an SEC decision on spot Bitcoin ETFs during this expiration, prompting a desire to be long volatility for potential plays on that decision

Notable trades this week include large buying in BTC call calendars as paper rolled March call length out to June as well as paper buying the put in January risk reversals and outright selling of the Jan $50k calls, most likely hedging activity. Major trades in ETH included size buying of the Dec 1900/2300 Call Spread and call rolling strategies mirroring those in BTC.  The largest single trade of the week was a ratio straddle spread with paper buying the ETH March 2400 straddle 19,000x and selling the BTC March 45,000 straddle 1000x

As of today, markets are once again trending lower, with both BTC and ETH down approximately 3%. Such pullbacks are viewed as beneficial and natural for the market, especially after a rapid price surge in a short timeframe. Approaching year-end, miners and traders holding long positions should contemplate hedging against further downside risk. The appreciation in put skew makes put spreads an attractive buying strategy in the Jan or Feb contract. Persistent call skew in longer dated options (March, June) shows risk reversals or 3 way structures (sell call spread, buy put) an appealing alternative. BitOoda stands ready to assist in determining optimal hedging strategies, and we welcome discussions to tailor solutions to individual needs.

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While the bullish fever continues to fuel the crypto markets, an anticipated pullback materialized this week, triggered by a Senate-proposed bill addressing concerns of digital currency misuse. The market experienced an opening gap of approximately 5%, resulting in liquidations amounting to around $400 million. Options flows focused on front end put buying as well as short dated straddles. During pullbacks such as this, there’s generally been a good bit of buy-the-dip activity in the options markets. Interestingly, this was little evidence of this activity, suggesting potential near-term market exhaustion and trader caution leading up to year-end.

The remainder of the week witnessed choppy, consolidative trading, with markets recovering nearly 3% post the FOMC rate decision, where the Federal Reserve maintained interest rates within the 5.25%-5.50% range, aligning with expectations. Analysts' projections of up to four rate cuts in 2024 contributed to the market's upward momentum. Implied volatility exhibited a muted reaction, decreasing slightly over the week. Worth noting is the resilience in the Jan BTC contract with anticipation of an SEC decision on spot Bitcoin ETFs during this expiration, prompting a desire to be long volatility for potential plays on that decision

Notable trades this week include large buying in BTC call calendars as paper rolled March call length out to June as well as paper buying the put in January risk reversals and outright selling of the Jan $50k calls, most likely hedging activity. Major trades in ETH included size buying of the Dec 1900/2300 Call Spread and call rolling strategies mirroring those in BTC.  The largest single trade of the week was a ratio straddle spread with paper buying the ETH March 2400 straddle 19,000x and selling the BTC March 45,000 straddle 1000x

As of today, markets are once again trending lower, with both BTC and ETH down approximately 3%. Such pullbacks are viewed as beneficial and natural for the market, especially after a rapid price surge in a short timeframe. Approaching year-end, miners and traders holding long positions should contemplate hedging against further downside risk. The appreciation in put skew makes put spreads an attractive buying strategy in the Jan or Feb contract. Persistent call skew in longer dated options (March, June) shows risk reversals or 3 way structures (sell call spread, buy put) an appealing alternative. BitOoda stands ready to assist in determining optimal hedging strategies, and we welcome discussions to tailor solutions to individual needs.

Notable Headlines

SEC denies Coinbase petition for new crypto rulemaking, Gensler says
https://www.theblock.co/post/267840/sec-denies-coinbase-petition-for-new-crypto-rulemaking-gensler-says
BlackRock's Bitcoin ETF Now Invites Participation From Wall Street Banks
https://www.coindesk.com/business/2023/12/12/blackrocks-bitcoin-etf-now-invites-participation-from-wall-street-banks/
US Senator Elizabeth Warren Introduces Bill To "Crack Down" on Bitcoin And Crypto
https://www.nasdaq.com/articles/us-senator-elizabeth-warren-introduces-bill-to-crack-down-on-bitcoin-and-crypto
Bitcoin, Ether Drop Spurs $500M in Liquidations, but BTC Entering 'Never Seen Before' Era
https://www.coindesk.com/markets/2023/12/12/bitcoin-ether-drop-spurs-500m-in-liquidations-but-btc-entering-never-seen-before-era/
SEC Chair Gary Gensler Tells CNBC The Commission Is Taking A "New Look" At Spot Bitcoin ETFs
https://www.nasdaq.com/articles/sec-chair-gary-gensler-tells-cnbc-the-commission-is-taking-a-new-look-at-spot-bitcoin-etfs
Bitcoin price slips below $42,000 as short-term holders take profit
https://www.theblock.co/post/266967/bitcoin-price-slips-below-42000-as-short-term-holders-take-profit
Bitcoin whales aim to reclaim $42K after BTC price dives over 3%
https://cointelegraph.com/news/bitcoin-whales-aim-reclaim-42k-btc-price-dives-over-3
Bitcoin's price advances as Federal Reserve keeps interest rates unchanged
https://www.theblock.co/post/267475/bitcoins-price-advances-as-federal-reserve-keeps-interest-rates-unchanged
$100K BTC? Don’t undervalue Bitcoin ETF influence, says Adam Back
https://cointelegraph.com/news/dont-undervalue-bitcoin-etf-influence-says-adam-back
Bitcoin Steadies Near $42,000 After Token’s Worst Stretch Since August
https://www.bloomberg.com/news/articles/2023-12-12/bitcoin-btc-steadies-near-42-000-after-token-s-worst-stretch

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

While the bullish fever continues to fuel the crypto markets, an anticipated pullback materialized this week, triggered by a Senate-proposed bill addressing concerns of digital currency misuse. The market experienced an opening gap of approximately 5%, resulting in liquidations amounting to around $400 million. Options flows focused on front end put buying as well as short dated straddles. During pullbacks such as this, there’s generally been a good bit of buy-the-dip activity in the options markets. Interestingly, this was little evidence of this activity, suggesting potential near-term market exhaustion and trader caution leading up to year-end.

The remainder of the week witnessed choppy, consolidative trading, with markets recovering nearly 3% post the FOMC rate decision, where the Federal Reserve maintained interest rates within the 5.25%-5.50% range, aligning with expectations. Analysts' projections of up to four rate cuts in 2024 contributed to the market's upward momentum. Implied volatility exhibited a muted reaction, decreasing slightly over the week. Worth noting is the resilience in the Jan BTC contract with anticipation of an SEC decision on spot Bitcoin ETFs during this expiration, prompting a desire to be long volatility for potential plays on that decision

Notable trades this week include large buying in BTC call calendars as paper rolled March call length out to June as well as paper buying the put in January risk reversals and outright selling of the Jan $50k calls, most likely hedging activity. Major trades in ETH included size buying of the Dec 1900/2300 Call Spread and call rolling strategies mirroring those in BTC.  The largest single trade of the week was a ratio straddle spread with paper buying the ETH March 2400 straddle 19,000x and selling the BTC March 45,000 straddle 1000x

As of today, markets are once again trending lower, with both BTC and ETH down approximately 3%. Such pullbacks are viewed as beneficial and natural for the market, especially after a rapid price surge in a short timeframe. Approaching year-end, miners and traders holding long positions should contemplate hedging against further downside risk. The appreciation in put skew makes put spreads an attractive buying strategy in the Jan or Feb contract. Persistent call skew in longer dated options (March, June) shows risk reversals or 3 way structures (sell call spread, buy put) an appealing alternative. BitOoda stands ready to assist in determining optimal hedging strategies, and we welcome discussions to tailor solutions to individual needs.

Notable Headlines

SEC denies Coinbase petition for new crypto rulemaking, Gensler says
https://www.theblock.co/post/267840/sec-denies-coinbase-petition-for-new-crypto-rulemaking-gensler-says
BlackRock's Bitcoin ETF Now Invites Participation From Wall Street Banks
https://www.coindesk.com/business/2023/12/12/blackrocks-bitcoin-etf-now-invites-participation-from-wall-street-banks/
US Senator Elizabeth Warren Introduces Bill To "Crack Down" on Bitcoin And Crypto
https://www.nasdaq.com/articles/us-senator-elizabeth-warren-introduces-bill-to-crack-down-on-bitcoin-and-crypto
Bitcoin, Ether Drop Spurs $500M in Liquidations, but BTC Entering 'Never Seen Before' Era
https://www.coindesk.com/markets/2023/12/12/bitcoin-ether-drop-spurs-500m-in-liquidations-but-btc-entering-never-seen-before-era/
SEC Chair Gary Gensler Tells CNBC The Commission Is Taking A "New Look" At Spot Bitcoin ETFs
https://www.nasdaq.com/articles/sec-chair-gary-gensler-tells-cnbc-the-commission-is-taking-a-new-look-at-spot-bitcoin-etfs
Bitcoin price slips below $42,000 as short-term holders take profit
https://www.theblock.co/post/266967/bitcoin-price-slips-below-42000-as-short-term-holders-take-profit
Bitcoin whales aim to reclaim $42K after BTC price dives over 3%
https://cointelegraph.com/news/bitcoin-whales-aim-reclaim-42k-btc-price-dives-over-3
Bitcoin's price advances as Federal Reserve keeps interest rates unchanged
https://www.theblock.co/post/267475/bitcoins-price-advances-as-federal-reserve-keeps-interest-rates-unchanged
$100K BTC? Don’t undervalue Bitcoin ETF influence, says Adam Back
https://cointelegraph.com/news/dont-undervalue-bitcoin-etf-influence-says-adam-back
Bitcoin Steadies Near $42,000 After Token’s Worst Stretch Since August
https://www.bloomberg.com/news/articles/2023-12-12/bitcoin-btc-steadies-near-42-000-after-token-s-worst-stretch

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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