SignalPlus Volatility Column (20230802): Curve Releases Crisis, Market Awaits New Capital Inflows
In the data released yesterday, the US recorded 9.582 million job vacancies in June, slightly lower than the expected 9.6 million, reaching a new low since April 2021. Fed dovish member Bullard refuted the idea of cutting interest rates and stated that there needs to be more evidence of inflation relief before ending the rate hikes, and any rate cuts will only happen in the distant future. Atlanta Fed President Bostic expects inflation to gradually fall towards the 2% target, and if the economic development meets expectations, he supports keeping interest rates unchanged at the next meeting, but will not cut rates until the second half of next year.
As for cryptocurrencies, yesterday the price of coins suffered a bit due to a vulnerability in the decentralized exchange Curve. But today, the price of the CRV token has returned to slightly below 0.6. One reason is that market sentiment tends to calm down, and another reason is that Justin Sun has purchased Curve Tokens worth more than $2 million as support and has promised to provide more assistance through the Liquidity Pool on the Tron chain. Another positive news is that technology company MicroStrategy, which holds a large amount of Bitcoin, has submitted an application to the SEC to sell $750 million of stocks to purchase Bitcoin. As a result, the price of BTC has seen a slight rise, reaching a level of $30,000 at one point. The smile of the option volatility has reversed, with the 25-day Risk Reversal (dRR) making a significant rebound towards call skew. The P/C Ratio of options trading volume has also decreased significantly.
Source: SignalPlus, 25 dRR rebound
Source: Laevitas
Thanks to the positive news brought by MicroStrategy, the market is beginning to anticipate new capital inflows. The overall implied volatility of BTC has increased, and the front end generally raises around 1%+. In the medium to long term, a rise of about 0.5% to 1% can also be seen. The bulk of the transactions focus on October 27th, accumulating a total of 2430 call options at 34000/36000/38000 positions, locking in the low skew value. Additionally, 1400 contracts of 32000-C were sold to swap for the low volatility Valley of August 25th, forming a calendar spread strategy.
ETH IV exhibited a completely different performance. The IV panic caused by the Curve incident yesterday has cooled down, and the selling pressure from retail investors has almost caused the short-term IV to give back all its gains. In terms of block trades, there is also a large volume of medium- to long-term bearish volatility strategy positions being opened. For example, 45K/48.41K call options were sold for the 27th of October with strikes at 2000/2100, and there were also a total of 15,000 ETH Short Straddle trades at the 1900 level for the 23rd of September and the 29th of December. One similarity with BTC is that ETH also sees a large volume of Call Calendar trades. For example, 15,674 buy 25th of August 23-2100-C vs sell 27th of October 23-2100-C trades, as well as 34,949 buy 29th of September 23-2200-C vs sell 29th of December 23-2200-C trades.
Source: Deribit (as of 16:00 UTC+8)
Source: SignalPlus
Source: Deribit Block Trade
Source: Deribit Block Trade
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