Oct 24, 2018 · 3 min read

Crypto derivatives market color #1

We are starting to publish regular market color on the cryptocurrency derivatives market. Feel free to reach out to us with comments and feedbacks!

Futures volume & open interest

Volumes have been falling across exchanges since the start of the month. The most liquid cryptocurrency instrument, Bitmex XBTUSD perpetual swap, has been trading $1.2bn on average a day versus $2.9bn the previous three months. Market woke up on two brief occasions, in sympathy with the stock market sell-off on the 11th and with the Tether scare on the 15th.

Figure 1 — Bitmex XBTUSD 24h trailing volume (source:Bitmex)

On a brighter note, the instrument’s open interest has been slightly on the rise suggesting investors are not exiting the space but marginally adding.

Figure 2 — Bitmex XBTUSD open interest (source:Bitmex)


Realized volatility peaked with the market in December last year and has been gradually decreasing since then (a measure of 19% is equivalent to a daily move of 1% in absolute value). In December, bitcoin was moving on average 8% a day versus 1.7% currently! This level of calmness was only briefly experienced in 2016.

Figure 3 — BTCUSD 1m and 3m realized volatility (source:Cryptocompare)

Flows in options market were until October dominated by call buyers as investors remained permanently short-term bullish. This is dissipating fast with traders turning net sellers of options this month by a significant margin. The ratio of option buyers to sellers has been on average 84% with four occurrences below 50%.

Figure 4 — BTC options buy/sell flows (source:Deribit)

Investors volatility expectations reflected in the price of options (implied volatility) have repriced aggressively lower as a result the last few days. The bounce in vol following the Tether’s scare was in particular quickly sold. The market is currently pricing in a 2.6% daily move for bitcoin.

The sell off in vol is interesting in the light of the coming catalysts in Q1 next year (bitcoin 10 years anniversary, cboe etf’s approval by the SEC, institutional inflows with Bakkt & other exchange ventures starting operations). The 29Mar19 $10,000 call costs 125 USD per bitcoin option, less than 2% of current spot.

Figure 5 — Bitcoin 3m implied At-the-money volatility (source:Deribit)

Stable coins

Finally, the week saw wild swings in stable coins as they became less stable than bitcoin itself! Despite a short term relief regarding Bitfinex’s banking situation, the spread between BTCUSDT and BTCUSD has not fully dissipated with a 2.5% premium remaining.

Figure 6 — BTCUSDT / BTCUSD ratio (source:Binance, Coinbase)

We also recently published a presentation on crypto derivatives market if you haven’t seen it yet:

Follow us on Twitter (@skew_markets) and our website ( for live analytics on bitcoin & ether derivatives.

Thanks for reading us!

The skew team

Disclaimer: this article is intended for informational purposes only. The views expressed herein are not and should not be construed as legal or investment advice or recommendations. Investors should do their own due diligence, with consideration given to their specific financial circumstances, investment objectives, and risk tolerance before investing. The individuals contributing to this article have positions in some or all of the assets discussed. This article is neither an offer, nor the solicitation of an offer, to buy or sell any of the assets mentioned herein.

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