SignalPlus Volatility Column (20240724): Silent ETFs

Yesterday (23 JUL), the crypto community focused on the launch of the ETH Spot ETF in the evening. Prior to this, the options market had already priced in a considerable amount of uncertainty at the front end, causing the volatility term structure of ETH to be severely inverted and reaching an intraday high before the previous days settlement. We observed that the price of the currency fluctuated before and after the launch of the ETF, and the market expressed their views fiercely, but from the data collected by Farside Investors, we can see that Grayscales products did suffer a large number of redemptions, similar to the situation of BTC ETF. Investors may want to take profits or simply transfer their positions to products with lower fees. But at the same time, represented by the products launched by Blackrock, Bitwise and Fidelity, more investors in the market chose to buy at the first time, completely offsetting the outflow of funds from the Grayscale ETF and dispelling some negative emotions. ETH finally closed only slightly lower.

Source: Farside Investors

Source: TradingView

Source: Deribit (as of 24 JUL 16: 00 UTC+ 8)

Looking back at yesterdays entire trend, ETHs Realized Vol was far from supporting the markets IV of up to 80% Vol. After ten oclock, ETHs volatility began to decline steeply, returning to a level of around 60+%. The past 24 hours trading was mainly based on Sell Vol, and was mainly distributed on expiration dates within one month.

Source: SignalPlus, ETF IV has been declining since its launch

Data Source: Deribit ETH transaction overall distribution

In terms of BTC, the IV term structure also shows the same trend as the uncertainty of ETH ETF dissipates, but the extremely high Vol Premium contained in 2 AUG is further highlighted after the front-end IV plummets. As we mentioned before, the market is still looking forward to the 2024 Bitcoin Summit. If presidential candidate Trump really makes a speech at the meeting about increasing Bitcoin as a reserve for the US economy, it will inevitably lead to a bullish carnival. In fact, we can also see that the Risky Flow of 2 AUG 24 in the past 24 hours is extremely obvious (refer to the figure below, BTC transaction distribution), 74000/76000 Calls are bought, and 66000 Puts are sold, which makes the Vol Skew of BTC in the middle and back ends also maintain a high point of about 5%.

Source: SignalPlus, BTCs Vol Skew has clearly tilted towards call options since 2 AUG

Data Source: Deribit, BTC transaction overall distribution; 2 AUG 24 transaction distribution

Source: Deribit Block Trade

Source: Deribit Block Trade

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