SignalPlus Volatility Column (20240521): The probability of ETF approval unexpectedly increases!
In terms of options, the surge in ETH's actual volatility has driven a significant flattening and increase in option IV. Compared to BTC's front-end increase of 2-6% Vol, ETH has outpaced BTC by nearly 6 times, reaching 30%-40% Vol in the short term.
Early this morning, Bloomberg ETF analyst Eric Balchunas unexpectedly raised the probability of ETH spot ETF approval from 25% to 75% on Twitter. He mentioned that he heard some rumors, and due to increasing political influences on this event, the SEC's stance on the issue might undergo a 180-degree turnaround, so everyone is now scrambling to prepare for it. Meanwhile, Coindesk published an article stating that three insiders indicated the SEC has requested ETF exchanges to expedite the update of the 19b-4 application, suggesting that the SEC might approve the application before this week's critical deadline. However, the 19b-4 is just a preliminary step for the ETH spot ETF, and issuers still need to obtain approval for the S-1 application to conduct ETF product trading.
Source: Twitter
The news quickly reached the market, and the price of ETH surged 20%, reversing its recent downturn and catching up with the recent gains of BTC, breaking through several resistance levels and challenging the $3700 mark. BTC also rose, breaking the new high since April and returning to above $71,000. This round of explosive growth triggered a massive short squeeze, with data from Coinglass showing that the short liquidation volume for ETH alone reached as high as $80.7 million yesterday.
Source: TradingView, ETH's surge catching up with BTC's recent gains
Source: Coinglass, large-scale short liquidations in the past 24 hours
In terms of options, the jump in ETH's actual volatility has driven the implied volatility (IV) of options significantly higher. Compared to BTC's increase of 2-6% Vol, ETH has surged nearly 6 times, pushing the short-term IV 30%-40% higher than BTC. The market is eagerly anticipating this week's decision on the ETH Spot ETF, pushing the ATM IV for ETH on the 24th close to its historical high of 100%. From a trading perspective, the volume of ETH call options is relatively balanced and concentrated at the end of May and June, including OTM calls for May and purchases represented by 4000-C for June. There is also a noticeable proportion of sell transactions at higher strike prices, possibly indicating an early consumption of the market's overbought sentiment under higher IV conditions.
Source: Deribit (as of 21 MAY 16:00 UTC+8)
Source: SignalPlus
Data Source: Deribit, overall distribution of ETH trading
Data Source: Deribit, ETH trading distribution for 31 MAY 24/28 JUN 24
Data Source: Deribit, overall distribution of BTC trading
Source: Deribit Block Trade
Source: Deribit Block Trade
