Crypto Derivatives 5th Mar 24

Key Insights

Futures-implied yields for BTC and ETH rose strongly during the rally to all-time high BTC prices, indicating a return to the strong demand for leveraged long exposure that we saw build-up ahead of the ETF announcement in late January. This is echoed by the extremely high funding rates for each coin. In a repeat of their reaction to last week’s spot rally, the term structures for both majors have inverted significantly, with the implied volatility at the front end reaching ~75%. Similarly, the volatility smiles are skewed strongly towards OTM calls, with a slight out-performance for BTC upside exposure  over ETH.

Futures Implied Yield, 1-Month Tenor

ATM Implied Volatility, 1-Month Tenor

Futures

BTC Annualised Yields

The strong demand for leverage has continued as BTC spot prices have continued to rally

ETH Annualised Yields

Yields show a similar demand for leveraged long exposure, but with annualised rates peaking 10 points lower than BTC

Perpetual Swap Funding Rates

BTC Funding Rates

Funding rates trade at consistently high levels, reflecting the demand for long exposure in the listed expiry futures

ETH Funding Rates

ETH perpetuals also trade at a consistent premium to the spot level, rising to similarly high levels as BTC’s perpetual

BTC Options

BTC SABR ATM Implied Volatility

The volatility term structure has inverted again in a repeat of last Wednesday’s rally

BTC 25-Delta Risk Reversal

While vol smiles skewed very strongly towards OTM calls in the last 24H, those levels have been moderated

ETH Options

ETH SABR ATM Implied Volatility

ETH’s term structure is similarly inverted, with ATM vols rising as high as 80% at short tenors

ETH 25-Delta Risk Reversal

ETH vol smiles are skewed decisively towards calls, but did not see the same spike and reversal that BTC’s did

Volatility Surface

BTC Implied Volatility Surface

Volatility across the surface is at the top of its 30-day range, with short-tenor OTM calls outperforming

ETH Implied Volatility Surface

ETH’s vol surface shows a rise in volatility across the surface, with out-performance in 1W and 1M calls and 3M puts

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

Historical SABR Volatility Smiles