Volume Quieter After Huge Options Flows

Strong rebound in risk assets

Cryptocurrency markets have stabilized after last week’s sharp declines, with BTC and ETH staging strong recoveries. Key resistance levels at $63,000 for BTC and $2.8k for ETH are in focus. Positive inflows suggest that US investors see value in accumulating BTC below $60,000 and ETH below $2.8k. The recent sharp decline has removed significant leverage, reducing the likelihood of further significant declines. Institutional investors are buying the dip, with 400,000 BTC ($23 billion) transferred to permanent holders over the past 30 days. The upcoming US CPI report and geopolitical events are key things to watch.

The realized volume converges with the implied volume

Cryptocurrency realized volatility has nearly aligned with implied volatility, with major moves decreasing relative to the lookback period. BTC implied volatility is mixed, with near-term volatility firm due to geopolitical risks, 1-2 month volatility better supplied, and longer-term volatility capturing the US election in demand. ETH implied volatility is slightly lower across the curve. While carry is still negative, it is less severe than last week. We expect frontal vols to taper off post-CPI and once geopolitical tensions ease.

ETH/BTC Volume Spread: Good Offer

ETC/BTC spot price is stabilizing after a sharp decline. The ETH/BTC volatility spread is trading well on the front end, matching near-term realized volume, while the back end spread remains around 10 vols, with potential to narrow as BTC gains political attention. BTC put skew is lower in the near term, but ETH 1Y calls carry more premium, despite BTC’s near-term dominance.

Option Flow

BTC options volumes hit $14 billion last week, one of the highest of the year. Short-term puts in the $58,000-$54,000 range were monetized, with hedges and bullish trades added in December. Longer-term calls were purchased, funded by selling lower strikes. ETH volumes increased 25% to $4 billion, led by short-term options. Protection was purchased in the $2,500-$2,000 range, with upside added later in the week, maintaining ETH’s high volatility premium. Notably, 4,000 calls for November 8 were purchased directly.

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