After surpassing the $30,000 mark last week, BTC experienced a U-shape fall followed by rise on Friday night, but its volatility did not fluctuate a lot (24H +0.3%). In contrast, ETH reached a value of 1965.24 today, edging closer to the highly anticipated 2000 mark. This surge prompted increased options buying in the market, leading to a further rise in volatility. By 16:00, it had climbed an additional 2% from the previous trading day.
In the options market, as ETH approached the key milestone of 2000, short-term implied volatility saw a significant increase, peaking on 7th July. The at-the-money (ATM) volatility for this week's delivery rose by 6.4% to 43.77%. Similarly, the longer-term volatility also experienced a rise, shifting from 4.28% to 43.43%. On the other hand, BTC has lost its recent prominence in the narrative. While its front-end implied volatility has been driven up, it no longer maintains the high relative volatility premium it once had compared to ETH.
The question of whether ETH can reclaim the $2000 level in short term has become a prominent topic among traders. There is notable activity among Deribit retail investors, with a significant number of call options being traded on various expiration dates in July. As a result, the 1-week risk reversal (RR) has experienced a sharp surge overnight reaching 5.23%. Additionally, we observe an increase in middle-to-short-term skews in August and earlier, all hovering around the 3% level. Despite BTC's cooling down, the skew has not decreased, and the crucial period continues to remain around 5%.
In the past few trading days, the options market has experienced low trading volumes. In the last 24 hours, BTC and ETH recorded volumes of only 493.45 million and 235.30 million respectively. The most notable trade in BTC involved the purchase of a calendar call spread. Traders bought a substantial number of short-term 31500/32000 call options while simultaneously selling 34000 calls that would expire at a later date. On the ETH side, there were more call spreads, with the market still placing bets around the 2000 level and selling options further out in exchange for some premium.
Considering the recent performance of BTC following its breakthrough of the $30,000 level, the market has slightly adjusted its trend expectation regarding a potential breakthrough of the $2000 level for ETH. On the other hand, a significant number of Short Risk Reversal strategies can be observed in the ETH bulk market. Traders are selling call options after the 2000 level and buying an equal amount of put options for protection. Given the current high premium on call options, this presents an opportunity for engaging in riskier strategies in the near future. For those holding spot positions, this strategy could also serve as a viable covered approach.
