Apr19 Crypto Derivatives Review

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!

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