1/8 Today rather unnoticed there was a massive vol liquidation event on @DeribitExchange. While spot prices did not move too far from yesterdays close, the implied vol on #BTC (not #ETH) exploded.
2/8 This shows how elevated the vol term structure now is compared to yesterday. That is an increase of more than 22% points (vols) on the long dated maturities. I can't remember having seen such an event in a long time.
3/8 To get a better understanding of the magnitude, its worth to look at specific maturities, e.g. here the Dec21.
4/8 Or at the smile in Sep21.
5/8 Now please bear in mind, that these are snapshots of the vols now! They came already off a lot from there highs. Just as an example Sep21 40k Puts even traded at 155+% implied vol.
6/8 My best guess is that this vol explosion was related to the massive put buys on the weekly 3 days ago. While the premium paid at the time was barely significant, the lot size was and the gamma if those come to play is massive (which they did).
1/6: A take on BTC market structure through options.
Current market structure is not yet stable. We went from capitulation in 2018 to stabilisation early 2019, to bull market and then to capitulation Mar 2020. Let's look at options skew (calls vs. puts).
2/6: Early 2018 we are still in a bear market, complete capitulation was still lacking. Market retesting the 6k level multiple times, support holding. Still more call skew than put skew.
3/6: Nov 2018 break down of the 6k level, new lows. Fully fledged market panic. Crypto is dead. Where is the floor? Put skew explodes.