SignalPlus Volatility Column (20240724): Silent ETF
Yesterday (23JUL), the focus of the crypto community was on the evening launch of the ETH Spot ETF. Prior to this, the options market had already priced in a considerable amount of uncertainty at the front end.
Yesterday (23 JUL), the focus of the crypto community was on the launch of the ETH Spot ETF in the evening. Prior to this, the options market had already priced in considerable uncertainty at the front end, leading to a severe inversion in the ETH volatility term structure, which reached an intraday high before the previous day's settlement. We observed some fluctuations in the coin price before and after the ETF launch, with the market expressing their views vigorously. However, from the data collected by Farside Investors, we can see that Grayscale's products indeed faced a significant amount of redemptions. Similar to the BTC ETF situation, investors might have wanted to lock in profits or simply shift their positions to products with lower fees. At the same time, represented by the products launched by Blackrock, Bitwise, and Fidelity, more investors in the market chose to buy in at the first opportunity, completely offsetting the outflow from the Grayscale ETF and alleviating some negative sentiment, resulting in ETH ultimately only slightly closing down.
Source: Farside Investors
Source: TradingView
Source: Deribit (as of 24 JUL 16:00 UTC+8)
Looking back at the entire trend yesterday, ETH's Realized Vol was far from supporting the market's high IV of up to 80%. After ten o'clock, ETH volatility began to steeply decline, returning to around 60+%. The trading in the past 24 hours was mainly focused on Sell Vol, primarily distributed around expiration dates within a month.
Source: SignalPlus, IV declined continuously after the ETF launch
Data Source: Deribit ETH overall trading distribution
In terms of BTC, the term structure of IV also exhibited a similar trend as the uncertainty surrounding the ETH ETF dissipated, but the sharp drop in front-end IV further highlighted the extremely high Vol Premium implied by 2 AUG. As we mentioned earlier, the market is still eagerly anticipating the 2024 Bitcoin Summit. If presidential candidate Trump indeed makes a statement at the conference about increasing Bitcoin as a reserve for the U.S. economy, it will undoubtedly trigger a wave of bullish excitement. In fact, we can also see that in the past 24 hours, the Risky Flow for 2 AUG 24 was very evident (refer to the chart below, BTC trading distribution), with Calls at 74000/76000 being bought and Puts at 66000 being sold, causing the Vol Skew for BTC in the mid to late term to remain around a high point of 5%.
Source: SignalPlus, since 2 AUG, BTC's Vol Skew has clearly tilted towards bullish options
Data Source: Deribit, BTC overall trading distribution; 2 AUG 24 trading distribution
Source: Deribit Block Trade
Source: Deribit Block Trade
