As the 12th of January crawls closer along the term structure, we see the first signs that vol markets are anticipating different responses between BTC and ETH. While the kink has moved closer and grown strong on BTC’s term structure of ATM implied volatility, ETH’s mid-Jan kink has largely resolved as a result of a rise in the 1W vol level. We see a similar departure in the skew of ETH’s vol smiles, which have slightly towards OTM calls in contrast to the spread seen in the skew of BTC smiles. However, there is little to separate the futures markets of both majors as perpetual swap funding rates explode positively and future-implied yields rise to their highest levels since July 2022.

The kink in the term structure of ATM volatility has shifted to shorter tenors as the expected date for an ETF announcement draws nearer, and outright volatility levels for tenors later than the end of January remain stable in the mid 50s. We have seen a recovery in BTC’s short tenor skew, driven by an increasing demand for OTM calls that has not been replicated in ETH’s surface. Instead, we see 1W ETH upside volatility falling while the 1M smile prices for a more neutral skew. Futures-implied yields climb higher once more, while the funding rate of both assets’ perpetual swaps continues to signal strong demand for leveraged long exposure.