March 4, 2023
February was Amazing!
We hope this message finds you well. February was an exciting month for us here at Paradigm with some new volume records and the upgrade of our BIT partnership. We’re thrilled to share our latest news with you in this edition of the Monthly Brief.
Our volumes saw an impressive surge in February, reaching $10.2B traded. We also had our highest options volume day ($1.1B) and week ($3.2B) in Paradigm’s history!
Shanghai is Coming
February has kept traders on their toes with both spot price-action and spot-vol correlation and speculation across the board. Although we didn’t see the explosive rip 40% off the lows like we did in January after CPI, we saw the impact of macro events once again on the broader crypto ecosystem. With CPI and PCE being two of the main drivers of the larger swings in price, crypto has certainly shown to still be heavily correlated to some of the primary global catalysts that impact all risk assets. There’s been quite a healthy bit of two-way flow throughout the month, with a bit more of a bearish bias starting from both a spot and vol perspective toward the end of the month.
ETH Shanghai appears to be a narrative beginning to pop up on the Twitter threads, but surprisingly (or unsurprisingly) it looks like the vol markets have not really seen much of an interest in trading this event - especially with all eyes on BTC recently as the rally has been predominantly BTC driven. From a volatility perspective, compared to a month ago, we’re starting to trend toward relative lows (albeit still a bit higher than mid-Feb), and currently IV trades a few points lower across all tenors in BTC when viewing January 27th to today. In ETH, it’s an even more noticeable drop, with ETH now at relative lows across the board across all tenors.
Skew in BTC does show a preference for calls across all tenors, from 7 day to 180 day, and longer term sentiment as expressed in call skew still leans slightly bullish when compared to the start of January’s dire bearish demand for downside (90 day skew on January 2nd was -7.8 and is currently +0.36). In ETH, however, skew is trending back toward negative levels showing a preference for puts in the longer-dated tenors, while there is still a bit of short-term bullishness expressed in a richer-than-average 7-day call skew. Dealers are speculated to be relatively short gamma above the 25K levels, and most of the exuberant demand for bullish OTM upside was placed earlier this month rather than at recent levels of stagnation.
BIT’s USD Margin Options Now Supported!
We’ve upgraded our partnership with BIT to enable you to trade their new $BTC, $ETH and $TON options denominated in and settled with USD or USDC! Start trading today!
February Content Highlights
Take a look at one of our more recent TBP podcast episodes with Caroline Mauron, Co-Founder of OrBit Markets. We deep dive into crypto exotics, the emergence of crypto-specific exotics such as impermanent lost swaps, and talk more about OTC counterparty risk.
In the third and final part of our exotics deep-dive series, we discuss more how traders visualize and manage the risks associated with products such as barrier option exotics. We talk more about how to hedge some of these risks and learn more about a couple of new exotic product offerings. We also include some nifty diagrams visualizing the Greeks for these more unique derivative products.
In our most recent chapter of The Macro Pulse, we cover some US inflation data that has recently become the center of attention for many macro traders. We talk about some of the most recent crypto-specific news events, such as the Hong Kong retail purchase rumors, and give some insight into broader macro trends, such as the VIX and repricing of rates.
The Mob Has Spoken
The Paradigm Team 💜