Download App
iOS & Android

BTC Vol Pops on Violent Technical Breakout

Repost from Imran Lakha Deribit Insights: “BTC Vol Pops on Violent Technical Breakout” The full report and all related findings are available on the official website of Deribit.

Technical Milestones for BTC and ETH

Bitcoin’s price has surged past the $38,000 resistance level with remarkable strength and minimal dips. The rise is getting parabolic as it approaches $45,000. Contrary to expectations that the impact of Bitcoin’s potential ETF approval had been almost fully accounted for, this upward trend suggests strong market confidence in the likelihood of a Bitcoin ETF launching early next year.

Bloomberg Intelligence predicts a decision window for this ETF news between January 5th and 10th. This anticipation is driving a surge in market interest, as fear of missing out (FOMO) builds up.

Ethereum is also experiencing a similar surge as speculation grows about its own ETF. Notably, Ethereum futures on the Chicago Mercantile Exchange (CME) are now trading at a 5% premium compared to Bitcoin, and Ethereum’s open interest on CME is also rising. This trend indicates that traditional finance sectors are beginning to show interest in Ethereum, although the ETH/BTC cross rate is retesting the lows due to recent BTC outperformance.

Factors supporting this bullish trend include an increase in global M2 money supply, the upcoming Bitcoin halving, and a potential Fed pivot next year, with over 100bp of cuts anticipated in 2024.

What’s more, investment products witnessed inflows of $176m last week, marking the 10th consecutive week of such inflows. Additionally, most on-chain metrics are showing strong growth, with total adjusted on-chain volume increasing by 29.8% to $255b in Nov, led by BTC and ETH.

BTC Realized Vol on the Rise

Bitcoin’s realized volatility recently dipped below 30% but rebounded to near 40% following its climb to $44,000. Ethereum’s realized volatility also decreased last week, stabilizing around 38%, as its price increase was less dramatic than Bitcoin’s, although it has also rebounded on the latest move.

Implied volatilities have risen alongside spot prices, particularly as key resistance levels were broken, fueling concerns about more volatile movements driven by a surge in fear of missing out (FOMO). The initial key target for Bitcoin was $42,000 which gave a short pause to rally, but that level is now history, as the asset keeps rising to currently top out just short of $45,000.

Volatility carry remains positive for both Bitcoin and Ethereum, suggesting an orderly market trend. Given this situation, we anticipate gamma sellers to become active again this week following the recent price break, assuming spot finds some equilibrium up here.

With implied volatility increasing, selling weekly calls in Bitcoin might be a viable strategy again. Our previous short positions were covered following the break above $38,000, in anticipation of further upward movement.

Firmer Term Structures

This week, the term structure for Bitcoin showed a slight increase, primarily in the short term. Gamma buckets for up to a one-month duration increased significantly, around 5-8 vol points.

The January 26, 2024, expiry is still marked by event volatility due to the established window for ETF approval between January 5th and 10th. The long end of the curve also saw a firmer stance by approximately 1.5 vols.

Ethereum’s term structure experienced a similar increase this week. The short end of its curve rose about 3 vol, while the March 2024 options were less well bid, with many options being rolled over to June 2024. Ethereum’s long-term volatility outperformed Bitcoin’s, with a nearly 3 vol increase, in line with the short end expiries.

ETH/BTC Vol Spread Grinds Higher

Despite Bitcoin leading the recent rally, the volatility spread between Ethereum and Bitcoin continued to increase this week. Currently, the entire curve trades with 0-2 vols Ethereum vol over.

If the Ethereum/Bitcoin spot spread hold current major support levels, there is potential for this vol spread to rise further in Q1 2024. This is expected as the market anticipates Ethereum to drive an upside break with greater opportunities ahead.

While there is still interest in chasing the Bitcoin movement to fully account for the expected ETF approvals in January 2024, the market is likely to shift focus, especially at the long end of the curve, placing a larger premium on Ethereum volatility from June 2024 onwards.

BTC and ETH Skew Converge Again

The skew between Bitcoin and Ethereum is aligning once more, as Bitcoin’s call skew decreases and Ethereum’s recovers. Both assets currently exhibit a minor call premium in the short end, which expands to about 6-7 volatilities in the longer end of the curve. The flattening of the front-end skew suggests a temporary halt in price movement.

Over the next month, leveraging any relative strength in Bitcoin to engage in call switches (long ETH/short BTC) remains a preferred strategy for 2024. We recommend using far out-of-the-money options, like 10-15 delta, to minimize market noise and focus on significant relative re-rating in Ethereum, which appears to be undervalued in the volatility surface.

The strong bid for Ethereum’s long-term call skew, comparable to Bitcoin’s, confirms that option traders are considering the Ethereum ETF approval scenario, but are trading in line until the Bitcoin narrative unfolds.

Option Flows And Dealer Gamma Positioning

The volumes in Bitcoin options remained stable at around $6 billion last week. Prior to the recent price surge, there was significant activity in call spread buying for the December 29, 2023, expiry, specifically buying 40k and selling 45k strikes. Following the surge past 40k, there was notable profit- taking in December 29 calls at the 40k and 42k levels, which helped moderate volatility.

Ethereum’s options volume decreased by about 10% to $2.5 billion. Last week’s activity mainly involved call spread buyers for the January 26, 2024, expiries (2400/3000 and 2600/3200) and the rolling of March 2024 calls into June 2024. Since Bitcoin’s recent upswing, Ethereum’s market flows remain bullish, particularly for longer expiries like January 2024, with less profit-taking.

Bitcoin’s dealer gamma positioning became more negative as it broke past 40k, but has somewhat recovered due to profit-taking in December calls. The latest push up to 44k has neutralised the positioning even more as we gravitate towards dealers long 29Dec 45k calls (part of call spread structures).

Conversely, Ethereum’s dealer gamma moved back into positive territory and has been steadily increasing. The selling of local gamma is providing dealers with inventory, and unlike Bitcoin, Ethereum hasn’t seen a significant influx of outright call buying, even with the break above 2150.


All Comments

Recommended for you

  • Making the Internet Alive Again

    The Internet is changing. Are we changing, too?

  • On Compressionism

    How a technological necessity is becoming the face of a burgeoning realm of cryptoart

  • Ethereum: The Infinite Story Machine 💫

    Yesterday, the first issue of the new ETH Investors Club (EIC) magazine went live digitally, with physical copies redeemable via NFTs on the way. The EIC effort is focused on spotlighting Ethereum’s current landscape through high-quality essays, and I’m honored that my piece, The Infinite Story Machine, was featured in the inaugural “Culture Corner” section.

  • BuildBear Labs Raises $1.9M to Accelerate Development of Web3 Tools for Secure dApp Creation

    Singapore-based BuildBear Labs has secured $1.9m in funding from investors including Superscrypt, Tribe Capital, and 1kx, as well as angel investors such as Kris Kaczor and Ken Fromm. The funds will be used to speed up development of the company's flagship platform, which provides developers with testing and validation solutions for secure decentralized applications. BuildBear Labs' platform is dedicated to dApp development and testing, offering developers the ability to create customised Private Testnet sandboxes across multiple EVM and EVM-compatible blockchain networks, with features including private faucets for unlimited Native and ERC20 token minting.

  • I Don't Like Layer 2 Anymore

    I had been quite vocal about Optimism on Twitter when it was trading at north of 5bn FDV back in June last year with a view that this red coin is criminally undervalued.

  • OnChainMonkey: Reimagining Bitcoin NFTs

    Exploring Ordinals As a Medium for Art and Programmability

  • Collusion-Resistant Impartial Selection Protocol (CRISP)

    We propose the Collusion-Resistant Impartial Selection Protocol (CRISP) to improve on MACI’s honest Coordinator assumption. By leveraging threshold cryptography and fully homomorphic encryption (FHE), we enable a distributed set of Coordinators (a “Coordinator Committee”) and shift the trust model from an honest Coordinator assumption to an assumption that there is no threshold of dishonest Coordinators in the Coordinator Committee. We propose to increase the trust model further by introducing economic disincentives for compromised Coordinators.

  • Multiple incidents of stETH being stolen and cross-chained to the Blast mainnet were discovered. The victim’s mnemonic words/private keys may have been leaked.

    SlowMist founder, Yu Xian, posted on X platform stating that SlowMist and MistTrack have received at least four cases of stETH being stolen and cross-chain transferred to the Blast mainnet. The common feature is that a small amount of ETH transaction fee is sent from an address with obvious traces (including exchanges) to the stolen address, and then stETH is cross-chain transferred to the Blast mainnet for subsequent transfer, and finally the remaining small amount of ETH in the victim's address is transferred to different ETH addresses. The known loss exceeds 100 stETH, and it is likely a group event. The mnemonic phrase/private key of these victims must have been leaked, and the attackers lurked to start on the Blast mainnet. Previously, Scam Sniffer monitoring showed that a certain address lost over 10 BTC pledged on Aave and some PANDORA due to interaction (clicking on the signature authorization) with a fake Blast airdrop website, with a total loss of approximately $717,817.

  • Hong Kong has closed the application for virtual asset trading platform licenses, and a total of 22 virtual asset trading platforms are waiting for approval.

    The Hong Kong Securities and Futures Commission website shows that the deadline for virtual asset trading platform license applications was yesterday (29th). As of the update on February 28th, there were a total of 22 virtual asset trading platform applicants.The applicants include Bybit, OKX,,, HTX, Bullish, and others.Ammbr, BitHarbour, and Huobi HK withdrew their applications, while Meex had its application returned by the Securities and Futures Commission.In addition, virtual asset trading platforms operating in Hong Kong that did not submit license applications to the Securities and Futures Commission by yesterday (29th) must end their business in Hong Kong by May 31, 2024, at the latest.

  • In February, NFT sales on the Bitcoin chain were approximately US$301 million, down nearly 10% from the previous month.

    According to cryptoslam data, the sales of NFTs on the Bitcoin blockchain in February reached $301,983,035.33, a decrease of nearly 10% from the previous month's $335,121,977.66, and the fourth-highest monthly sales to date. The total number of NFT transactions on the Bitcoin blockchain in February was approximately 203,000, a decrease of about 18.4% from the previous month. In addition, there were 67,139 independent buyers and 57,724 independent sellers of NFTs on the Bitcoin blockchain last month.