SignalPlus Volatility Column (20230809): Market Sentiment Returns Bullish on Potential Positive Catalysts
In yesterday's Galaxy second-quarter conference call, Galaxy CEO Mike Novogratz quoted sources from BlackRock and Invesco, saying that the BTC spot ETF may be approved at some point before February 2024. Novogratz emphasized the significance of this information, as his contacts with BlackRock and Invesco led him to believe that approval of the ETF is only a matter of when, not if. At the same time, analysts have mentioned that last year, the SEC was sued for rejecting Grayscale's application to convert Bitcoin Trust into a spot ETF, and if the SEC loses this case, the approval of the spot ETF may come sooner than the six-month window period estimated by Galaxy.
Boosted by the potential positive news, the price of BTC broke through 30,000 and reached an intraday high of 30,200 yesterday, but retreated slightly and ultimately fell below 30,000. It closed at 29,792.46 (+2.16%). Meanwhile, ETH also rose by 1.72% to 1,860.04.
With the increase in actual volatility and the resulting greater uncertainty for the future, the front-end IV of BTC has been significantly raised, and the curve has changed from steep to flat. In contrast, the IV of ETH has not seen significant fluctuations. Under the weak correlation effect, the front-end IV of ETH has slightly increased by 0.5% to 1%, while the far end has continued to decline by around 0.1% to 0.3%.
Source: Deribit (as of 16:00 UTC+8)
Source: SignalPlus, significant increase in front-end IV of BTC
Looking back at the bulk trades of the past 24 hours, on one hand, the bullish sentiment is returning to the market. There have been significant volumes of Long Call Spread strategies on both BTC and ETH, such as BTC 29 DEC 23 40000/50000 and 28 JUN 24 40000/55000, and ETH 29 JUN 24 2300/3000 and 3500/4500, which have driven the increase in Skew. On the other hand, due to the rising front-end IV of BTC, the volatility risk premium has increased, and strategies aiming to short the front-end volatility have regained favor among traders, resulting in the selling-off of Strangle/Straddle options on BTC-18 AUG 23 and 25 AUG 23 at the peak of IV. Lastly, it is worth mentioning that despite the overall optimism in the community yesterday, there were still 13,800 contracts of Short Call Spread traded on 29 MAR 24 (3000/3500, 4500/5000), indicating a relatively conservative attitude held by some traders towards the potential return of a bullish ETH market.
Source: SignalPlus，RR continues to rise
Source: Deribit Block Trade
Source: Deribit Block Trade
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