The Monthly Brief | July 2023

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August 5, 2023



- Paradigm drives $9.6B in volumes and captures 34% of global crypto option volume despite muted market activity during Summer break 📈💼
- Exciting guests on "The Big Picture" podcast: GSR delves into crypto derivatives, Marty shares vol selling strategies 🎙️💡
- XRP decision leads to a rally as market interprets it as a sign tokens may not be considered securities anymore 📈🎉
- Blackrock's BTC ETF application adds to the buzz and discussions in the market 🚀🗞️
- BTC stabilizes in $30-31k range, Paradigm facilitates significant upside flows 🔄🚀


Out for Summer

July was a month of intriguing developments in the crypto space, with Paradigm successfully capturing an impressive 34% of the global crypto option volume despite the overall muted market activity most likely due to Summer break.

We had some exciting guests join us on "The Big Picture" podcast, with GSR diving deep into the world of crypto derivatives, and Marty sharing his valuable insights into vol selling strategies.

Notably, the XRP decision broke in favor of XRP, resulting in a rally as the market interpreted it as a sign that tokens may no longer be considered securities. Additionally, the news of Blackrock's application for a BTC ETF added to the buzz, sparking discussions about the potential impact on the crypto market.

With all these exciting developments, we can't wait to delve into the details. 

Let's jump in. 👇


After the substantial rally in June, BTC stabilized in the $30-31k range, consistently but unsuccessfully striving to break out throughout early July. Paradigm facilitated significant upside flows as BTC flirted with the $31k mark, underscored by ~3k Dec 40k call options bought in the first half of the month. 

Our institutional clients align with the sentiment of a potential BTC breakout, yet the considerable interest in longer-dated contracts perhaps suggests a degree of uncertainty regarding timing, particularly as discourse surrounding ETFs and the halving narrative intensifies. December claims the largest BTC open interest expiry on Paradigm, with 12.2k contracts solely comprising the $40k and $35k strikes, accounting for 9.1k and 3.1k contracts, respectively. Looking at 2024 expiries, we witnessed recent purchases of June 85/90k and 95/100k call spreads - anticipation of ETF approval & BTC halving, or just an upside tail hedge?

In the aftermath of the XRP-led rally, a significant ETH overwriter trading off Paradigm panic covered short upside positions, most notably in the December 2023 and March 2024 expiries. This activity was precipitated by March upside vols moving 8v against the seller's favor from 44v to 52v in the course of a month. Simultaneously, significant at-the-money straddles were purchased on Paradigm, which perhaps signals market makers unwinding hedges in conjunction with this entity. These large overwrite unwinds lead to one of Paradigm's most dramatic whiplashes in longer-dated volatility flows in recent memory, as illustrated by changes in our net vega flows.

paradigm monthly brief eth strike distribution

As the month drew to a close, a large reset in implied volatility occurred with spot prices trending lower, triggering tactical buying flows in anticipation of a rebound from some of the lowest volatility levels in history. According to K33 Research, BTC has seen lower 30-day realized volatility on only eight occasions since 2019: two days in July 2020 and the remainder before BTC's rise from its bear market low in April 2019. Although Paradigm volumes continue to correlate tightly with volatility levels, an increase in buying flows is logical given the remarkably low levels of implied volatility, combined with late July's elevated systemic defi risk from the potential liquidation of the CRV founder's $100 million Aave loan. 

As we transition into August, 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.

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July Content Highlights

Marty Talks Running a $20M Crypto Short Vol Fund

In this engaging episode, we join Marty on his remarkable journey in the crypto world and gain valuable insights into how he successfully navigated through the recent volatility crash. Marty shares his expertise, discussing how he identified and caught the volatility crash, along with a thorough analysis of option flows from the past week.

Watch Episode Here

Crypto Option Insights: Navigating Macro Regime Change and China Interventions

This Macro Pulse we cover the current market conditions, where China's interventions have impacted low volatility and range-bound movements. Amidst all this, Central Banks have come under the spotlight, as the potential for regime change beckons in the financial landscape. Surprisingly, there are still bullish flows in the market and traders are keeping a close eye on these developments to navigate the dynamic and uncertain market environment effectively.

Read Full Article

The Great Reversal of ETH Option Vega Flows w/ GSR

Don't miss our insightful episode diving deep into the world of crypto derivatives with Simran and Matt from GSR. We explore the current low-volatility state of the market, its impact on trading volumes and options markets for Bitcoin and Ethereum, and influencing narratives such as the potential Bitcoin ETF approval and the Ripple lawsuit. We also talk about the potential catalysts for higher volumes, like institutional involvement and regulatory developments, and gain valuable insights for informed decision-making in the crypto derivatives space.

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.

The Paradigm Team 💜

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