Coinvexity 20
Following last year’s cataclysmic sendoff, spot seems to have found a footing and after rushing higher now appears to be taking a breather from the otherwise jittery state of affairs.
Futures
Spot rallied circa 38% from Nov lows of 15,500 to 21,500 and this is reflected in futures basis for the majors. Despite posting only modest levels (around 1bp 6mo), a clear upward bias is visible.
ETH mirrors BTC’s recent elative drive higher but still appears cautionary. It’s too soon to say we’re out of the woods and although basis hints at higher futures 6 months out, the curve beyond 6 months is less optimistic. At best, it isn’t overwhelmingly pessimistic which given recent events is as good a state as any.
Vol
BTC
Vol in BTC has compressed across all tenors as the market anticipates this week’s CPI prints. 1wk vol has risen from last week’s trough of <40 to 60 vol with all tenors following suit albeit in a less exaggerated manner.
The term structure’s transformation across time shows a translation lower from 3 weeks to 1 week ago, then a translation higher from a week ago in addition to an inversion, accentuated towards the near end.
Skews across all tenors are sitting in negative territory, showing a slight bias for Call options. Upon close inspection, 1wk is posting higher than 1mo. This may prove meaningless in the grand scheme of things but then again, might be indicative of perceived weakness in the near future.
BTC’s recent surge higher has eclipsed ETH, so much that 1wk ATM IV ETH-BTC ventured into negative territory posting -5 vol. Levels have since regained their positive skew but it might be worthwhile comparing the skew on wingy strikes across both assets in search of more magnified opportunities.
ETH
ETH closely reflects price action in BTC, however the 15 Jan peak in vol seems less pronounced than with BTC. Levels here have narrowed in as the term structure (pictured below) flattens.
Skews lean negative with the 1yr slowly drifting towards parity as Call vol increases. 1wk skews have sat in negative territory since the middle of the month and following this week’s prints, we will see whether increased Call demand will be short lived or a new regime.