TL;DR

- Paradigm drives $9.6B in volumes and captures 32% of global crypto option volume despite muted market activity during Summer break. 📈💼
- The Big Picture Podcast added two new co-hosts to the show to spice things up. 🎙️💡
- We launched Unified Markets for mobile, now trade from your phone.  📱
- Grayscale won their lawsuit against the SEC. 📈🎉

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Summer's Almost Over

August marked a month of significant developments in the cryptocurrency sphere, where Paradigm achieved an impressive 32% share of the global crypto options volume, even amidst the summer slowdown.

Our "The Big Picture" podcast welcomed two new co-hosts, Greg from Amberdata and the renowned Marty (@Thingsvol) on Twitter, adding diverse perspectives to our discussions.

Notably, Grayscale's legal victory against the SEC was a highlight, although the decision regarding a spot Bitcoin ETF was pushed back, yet again.

With these intriguing developments, we are eager to delve into the details and explore their implications further. Let's get started. 👇

Stabilization

While global crypto activity continued to cool, in August we are encouraged by the resiliency of the options market, with Paradigm option volumes +12.5% vs. July, compared to global derivative volumes -12.1% MoM. 

In the first half of August, heightened interest in upside was evident among Paradigm participants, driven by anticipation of another spot leg higher from positive ETF developments or an improving macro liquidity environment. Notable prints below:

BTC

1375x 29-Dec-23 36000 Call bought

1360x 25-Aug-23 32000 Call bought

1255x 27-Oct-23 38000 Call bought

ETH

20809x 25-Aug-23 2000 Call bought

15850x 27-Oct-23 2300 Call bought

10500x 29-Sep-23 2000 Call bought

On August 17, the floor suddenly fell out from under the crypto market as spot prices plummeted from $28,600 to roughly $24,600 in a matter of minutes. While some have suggested the selloff was a reaction to macroeconomic events such as Evergrande's bankruptcy or rumors about SpaceX's BTC write-downs, our analysis suggests it was technically driven. The rapid liquidation appeared to be initiated by whales divesting from some of their BTC holdings into a thinly-traded market, serving as the primary catalyst for the ensuing volatility and liquidations.

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This event led to the second-largest liquidation day in Deribit's history (see above). Deribit BTC perpetual contracts traded momentarily at a whopping $1,500 discount to spot, likely due to Deribit delta-hedging large liquidated short vol positions into an illiquid tape.

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In a striking 12-hour span, overnight ATM volatilities skyrocketed to 120v before plummeting back to sub-40v, marking the most dramatic vol reversal in 2023. Correspondingly, BTC's "vol-of-vol" metric surged to post-FTX highs, highlighting the exceptional shifts in implied volatility witnessed on that day.

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As we transition into the fall, we remain optimistic despite a strong repricing in 25-delta skews in favor of puts, a rare occurrence in 2023.  

We are encouraged by the increased likelihood of ETF approvals heading into 2024 given the Grayscale news, as well as the Financial Accounting Standards Board's (FASB) recent reclassification of crypto assets, enabling them to be valued at fair market value rather than as intangible assets subject to only impairment losses. We see this as a pivotal development that allows public companies to own crypto assets on their balance sheets without unfair treatment.

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Stay informed and engaged with us through our weekly "The Big Picture" podcast and "Paradigm Edge" Telegram channel — your go-to resources for navigating this ever-changing crypto derivatives landscape.

RFQ Directly from your Deribit Positions!

Adding to or unwinding your existing positions has never been easier!

✅ View, group and filter your Deribit positions across ALL sub-accounts!

✅ Create a single or multi-leg RFQ / Order Book (OB) straight from our UI 🔥

How do I set this up?

1️⃣ Enable Read-Only permissions for your Deribit API key here.

2️⃣ Go to your Paradigm Admin Dashboard here. You should see a green tick beside the API key.

July Content Highlights

Our New Co-Host Marty and Greg Magadini talk Volatility and ETF’s

In this episode we explore key insights in the world of vol. Starting with the breakdown of the ETH Dvol Index, the video delves into the correlation between spot prices and volatility, the intriguing dynamics of the Butterfly Index, and the implications of spikes in the market. The discussion extends to portfolio management strategies using volatility spikes, followed by an analysis of the relationship between VIX lows and crypto volatility.

Watch Episode Here

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Crypto Option Insights: Navigating Macro Regime Change and China Interventions

In this episode of TBP we shared valuable insights about volatility compression. Gordon provides in-depth explanations of the factors contributing to this trend. And we provide listeners with a clearer understanding of its volatility's significance in the context of cryptocurrency markets.

Watch Episode Here

Thanks for taking the time to read our Monthly Brief. Things are starting to look interesting from a Macro perspective going into the end of the year. It will be fun to watch how things pan out.

Reach out to your rep for details on what we’re building and make sure you ​​follow us on Telegram, Twitter, LinkedIn, and YouTube.

Sincerely,
The Paradigm Team 💜