Research on Time-dependent Evolution of Bitcoin Option Backward Volatility

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Recently, the peer-to-peer data analysis team conducted a time-dependent evolution study on the inverse volatility data before and after the sharp drop in the Bitcoin options market on March 12. Our 3D graphics clearly show the change process of the full-cycle option volatility first rising rapidly and then slowly decreasing with the rapid decline of market price and slow correction, which has important indicative significance for strategic investment in market volatility.

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The time-dependent evolution of the main contract opening volume of Bitcoin options in the second quarter: put options with an exercise price of 6,000 US dollars

Following the release of the analysis results of the time-dependent evolution of the opening volume of the Bitcoin option contract due on June 26 on the Deribit exchange since it was listed at the end of last year, as of the 10th of this month (the time-dependent volume of opening positions of the main contracts of Bitcoin options in the second quarter Evolution), the peer customer data analysis team further intercepted the time evolution curve of the open position of the put option with an exercise price of 6,000 US dollars, and compared it with the price of Bitcoin, it is shown as follows:

a closer examination of 6k strike line you can see it better: huge open interest V shape "squeeze&climb back". our theory is forced liquidation of put shorts made the most part, tho you can't exclude the drive of profit-taking especially after significant price recovery cross 6k

This time, the price of Bitcoin has plummeted along with major global assets, and it has also caused a thrilling liquidity crisis and capital game in the derivatives market. In the long run, it will promote the further healthy development of the digital currency capital market.

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The short-term panic volatility of futures and spot spreads ends

With the global epidemic and the temporary recovery after the sharp drop in the stock market, it is not only the price of Bitcoin itself that has rebounded after this round of market crash, but the price difference between futures and current prices has also touched the "deep shadow" range of more than -20% on a technical level. After repeatedly crossing the "0" line, it remains positive "Yang" for a week.

pic is always better to show how simple things work beautifully. check the left side of this graph just 1 day before the flash crash(3/12), +8% spread flipped into -20% ish in a matter of HOURs. Thats like a hefty 30% yearly return by just buy&hedge on a good day(or any "+"day).

Different from the direct information of the price itself, the difference between the main long-term futures contract (two quarters, or even three quarters) and the spot price reflects the market's confidence in the future price of Bitcoin, and the "deep shadow" area after March 12 indicates short-term market panic Reaching the extreme value, the forward futures liquidity is almost exhausted under the selling pressure; after the deep drop, it repeatedly crosses the "0" value, which proves that the market is "oversold" and is recognized, but risk aversion is still dominant, and no consensus can be reached on the future trend; The positive value of the current date price difference for one week in a row is a key step for the market to gradually break away from the panic period and regain confidence before the halving.

Continuing to pay attention to the trend of the current price difference and the frequency of positive and negative limit values ​​will serve as a good reference for investors to enter the market and choose the timing of hedging.