SignalPlus Volatility Column (20240724): Silent ETF

Yesterday (23 JUL), the crypto community's focus was on the evening launch of the ETH Spot ETF. Prior to this, the options market had already priced in significant uncertainty, causing ETH's volatility term structure to invert sharply and reach intraday highs before settlement the previous day. We observed some price fluctuations around the ETF launch, with the market aggressively expressing its views. However, data from Farside Investors showed that Grayscale's products indeed faced massive redemptions, similar to the BTC ETF scenario, where investors likely took profits or simply shifted positions to lower-fee products. Meanwhile, products from BlackRock, Bitwise, and Fidelity saw strong inflows, fully offsetting Grayscale's outflows and alleviating some bearish sentiment. ETH ultimately closed only slightly lower.

Source: Farside Investors

Source: TradingView

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

Reviewing yesterday's overall trend, ETH's Realized Volatility failed to sustain the market's implied volatility (IV) of over 80%. After 10 PM, ETH's volatility began a steep decline, returning to around 60%. The past 24 hours saw predominantly Sell Vol activity, concentrated in expiries within one month.

Source: SignalPlus, IV declined post-ETF launch

Data Source: Deribit ETH trading distribution

For BTC, the IV term structure mirrored ETH's post-ETF uncertainty resolution, but the front-end IV plunge highlighted the extreme Vol Premium in 2 AUG. As we mentioned earlier, the market eagerly awaits the 2024 Bitcoin Summit. If presidential candidate Trump indeed announces plans to add Bitcoin as a U.S. economic reserve, it could trigger a bullish frenzy. Notably, the past 24 hours saw aggressive Risky Flow for 2 AUG 24 (refer to the chart below: BTC trading distribution), with 74000/76000 Calls bought and 66000 Puts sold, keeping BTC's back-end Vol Skew at a high of around 5%.

Source: SignalPlus, BTC's Vol Skew tilted toward Calls from 2 AUG

Data Source: Deribit, BTC trading distribution; 2 AUG 24 trading distribution

Source: Deribit Block Trade

Source: Deribit Block Trade