Apr19 Crypto Derivatives Review

skew.
skew.
Apr 30, 2019 · 4 min read

1/. Spot: healthy dispersion of returns

Large cap top 3: BCH +51%, BTC +26%, BNB +24%

Large cap bottom 3: BSV -17%, ONT -18%, MKR -25%

Strong month overall with BTC leading into Consensus. Worth noting, ETH is having a timid year, +11% this month, +17% YtD

2/. The two main trading events:

Short squeeze on the 2nd of April — $11bln of bitcoin perpetual swaps going through

Tether scare on the 25th of April — $7bln

3/. CME had its largest volume day on record on its bitcoin futures contract — trading 22,542 contracts on the 4th of April ~ 112k bitcoins ~ $500mln

4/. In total on Bitmex, $905mln got market bought and $793mln market sold through liquidations ~ $1.698bln in total

5/. The 2nd of April move was challenging from a liquidity perspective and might have caught off guard some market makers.

Cost of liquidity spiked and is slowly retracing — still 50% above compared to prior the move

6/. Open interest collapsed 35% on the initial short squeeze and rebuilt gradually during the month.

Back to initial level in $ terms.

7/. Despite a more constructive market, the futures curve on bitcoin is structurally inverted reflecting potential credit worries relative to crypto exchanges.

8/. But then why is the ether futures curve nicely upward slopping?

This is an ongoing debate!

9/. In vol markets

BTC 1m realized volatility 71% ~ average daily move 3.73%

ETH 1m realized volatility 80% ~ average daily move 4.21%

One 20% move at the start of the month and then very little leads to an average month in terms of bitcoin volatility

10/. Implied vol tracked realized — spiking initially and then drifting lower — pricing in a 3.15% daily move over the next 3m.

This could retrace further judging by historical levels.

11/. Worth noting the ETH / BTC six months implied spread is trading at nearly flat which seems to be a function of poor liquidity on the ether options side.

Market currently sees ETH as volatile as BTC over the next six months.

12/. Outside Q4 2017 / Q12019 this has never happened on a six month view.

13/. Deribit had a strong month with $16.7mln notional of bitcoin options trading on average daily and a record day on the 2nd at $63.4mln notional.

14/. Options market backed probabilities have been revised significantly higher.

Market sees BTC > $10k by end of September at 11% vs < 5% prior to the move. Sees 19% probability of BTC > $10k by December.

15/. In the stable coin space, USDT is trading at a discount to USD again following news that Tether is not backed 1 for 1.

The market took this reasonably well.

16/. USDC, TUSD and PAX are benefiting marginally…

17/. … but overall the space has lost a bit of momentum this year

18/. In Defi space, DAI struggled to maintain its peg as the market rallied forcing the community to raise rates and asking questions around the sustainability of the stabilisation mechanism.

Not a good month overall for Maker Dao after a great run!

19/. That’s it on our side for this month!

Don’t hesitate to get in touch with us with feedbacks and suggestions: contact@skew.com.

We are also hiring if you are up for a challenge at the crossroad of cryptos and capital markets: https://www.skew.com/

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store