Crypto Derivatives: Analytics Report – Week 44

From deribit by Block Scholes

Key Insights:

The bullish pre-election positioning that we saw building up earlier in October has continued with vigour over the last 3 days. Futures-implied yields, perpetual swap funding rates, and now implied volatility have risen to months-long highs, with short-tenor option expiries out-performing to invert the term structure of volatility in a similar manner to the shape we observed ahead of the ETF launch in January. ETH derivatives indicate an expectation that the second largest crypto-currency will continue its years- long trend of under-performance through the event risk, lagging BTC in all metrics and assigning a 10 point volatility premium over BTC, but echo the trend of increasing bullish sentiment that we see expressed across markets.

Futures Implied Yield, 1-Month Tenor

ATM Implied Volatility, 1-Month Tenor

Crypto Senti-Meter

BTC Derivatives Sentiment

ETH Derivatives Sentiment

Futures

BTC ANNUALISED YIELDS – The inversion of the yield term structure has deepened, reflecting increasing leveraged long positioning ahead.

ETH ANNUALISED YIELDS – futures yields invert, albeit to lower levels than BTC, reflecting bullish-but-not-that-bullish positioning ahead of the election.

Perpetual Swap Funding Rate

BTC FUNDING RATE – Intense and sustained positive funding rates reflect a willingness to pay for leveraged long exposure into next week’s event risk.

ETH FUNDING RATE – ETH’s funding rate reflects the same conclusion as it’s futures yields – bullish positioning but without the same exuberance as BTC.

BTC Options

BTC SVI ATM IMPLIED VOLATILITY – The term structure of volatility has finally inverted after months of an election-dated volatility premium.

BTC 25-Delta Risk Reversal – A brief reversal of short-dated sentiment over the last 2 days has resolved with a return to a bullish skew towards OTM calls.