Crypto Derivatives 27th Feb 24

Key Insights

Futures-implied yields and perpetual swap funding rates have risen strongly, to levels that we saw last just before the flush out of leverage ahead of the ETF announcement in early January. We also note that both majors are pricing for higher levels of volatility, with a stronger rise at the front end of the term structure that, while not leading to an inversion, drastically compresses volatility levels across the term structure. The rally that has seen futures leverage and volatility climb higher has not had as strong an effect on the skew towards OTM puts, which for both BTC and ETH remain either neutral or put-skewed at short tenors.

Futures Implied Yield, 1-Month Tenor

ATM Implied Volatility, 1-Month Tenor

Futures

BTC Annualised Yields

Yields are at their highest values in over a month, trading at 20% at an annualised rate for 1-week tenors

ETH Annualised Yields

ETH’s yields have not spiked as high, but nonetheless trade at historically elevated levels

Perpetual Swap Funding Rates

BTC Funding Rates

Funding rates now trade close to the persistently high levels that saw a flush out of leverage in January.

ETH Funding Rates

Funding rates have remained at consistently high levels, indicating continued strong demand for leveraged long exposure.

BTC Options

BTC SABR ATM Implied Volatility

The volatility term structure has compressed as short-tenor vols have led the rise to levels above 60%.

BTC 25-Delta Risk Reversal

The skew of BTC’s vol smiles remains towards OTM calls at a 3M tenor only, with shorter tenors neutral

ETH Options

ETH SABR ATM Implied Volatility

ETH’s ATM vols have risen near-monotonically, with vols across the term structure trading at similar levels.

ETH 25-Delta Risk Reversal

Volatility smiles remain slightly put-skewed at shorter tenors, with the 3M tenor pricing more decisively bullish

Volatility Surface

BTC Implied Volatility Surface

The red at shorter-tenors in the volatility surface highlights the compression of the term structure over the last 24H.

ETH Implied Volatility Surface

The red at shorter-tenors in the volatility surface highlights the compression of the term structure over the last 24H.

Z-Score calculated with respect to the distribution of implied volatility of an option at a given delta and tenor over the previous 30-days of hourly data, timestamp 10:00 UTC, SABR smile calibration.

Volatility Smiles

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Historical SABR Volatility Smiles