June 7, 2023
📈 Paradigm Upgrades: Real-time IV and Greek values added.
💤 May's Crypto Slumber: Volatility sinks, Bybit future spreads surge.
📰 ICYMI: Highlights include Paradigm Insights Report, TBP episode, Quant Analysis of BTC Trades.
🗣️ The Mob Has Spoken: Join the discussion, stay updated.
Sell in May Go Away
In a predictable turn of events, the old adage "sell in May and go away" rang true once again. The month witnessed volatility sinking to mid to high 30s in the 1-2 month range, fueled by relentless mechanical selling.
However, amidst the current low volatility environment, Bybit future spreads experienced a tremendous surge, reaching an impressive $1 billion in volume. This remarkable growth represents a doubling from the previous month's figure of 493M, highlighting the resilience of market participants.
Regardless of volatility, we continue to build. In fact, we’ve made a few upgrades to the Paradigm platform we think you will enjoy:
🚀 Implied Volatility (IV) became available on the Unified Markets screen.
📈 Greek values (Delta, Gamma, Vega, Theta) on the primary Unified Markets screens.
🔁 Quickly re-price the same structure to the same counterparties with a lightning fast one-click “Re-price.”
🔽 We added “filters,” so now you can focus on what matters most to you!
⏯️ New Quick Action Buttons to easily Create RFQ and Create OB right from the Trade Tape.
Now let’s dive into the weeds a bit. 👇
May's Crypto Slumber
After all the excitement and commotion in the first quarter surrounding the new breakouts in price every other week, to close out Q2 and through May, we’ve seen one of the most somnolent trading environments in recent times. As meme coin mania exploded during April and spilled over into May, and with Nvidia recently releasing their earnings report highlighting the value of AI and booming revenue forecasts, BTC no longer feels like it’s at the center of attention - IV’s and the trend in volatility throughout May certainly highlight this as well.
The trading regime seen in May was primarily defined by range-bound trading and a steady decline in implieds. For example, 30-day ATMs in BTC started the month off around a 50 handle before gradually descending into the mid-30s to kick June off. ETH saw a similar trend over time established, and at certain points throughout the month, ETH implieds traded below BTC.
Although implieds saw a steady decline throughout May, and spot volumes dwindled, sizable blocks still traded, with one of the most interesting ones being the constant blocking of ETH calendars on Deribit. Other popular trades included several different plays on term structure with longer-dated IVs looking relatively cheap driving traders to pick up longer-dated optionality while betting against the market movement in the front months.
Skew saw sporadic fluctuations in both BTC and ETH, with short-dated skew starting the month off signaling a slight preference for the 25D calls over puts, and saw a slow decline into the negatives with scattered jumps higher on sharp moves toward the upside as traders speculated on potential breakouts that failed to materialize.
May Content Highlights
Paradigm Institutional Insights Report
Thanks to Paradigm's groundbreaking report, unlocking the secrets of the crypto options block market has never been easier. Packed with cutting-edge analysis and unique data, this inaugural report reveals key trends and insights to help institutional investors stay ahead of the curve. So take advantage of this must-read resource for anyone navigating the exciting world of crypto derivatives!
TBP: Greg Magadini Talks ETH vol
In the most recent chapter of The Macro Pulse, we dive more into the seemingly everlasting stress in the US banking system, how the recent shifts in rates have impacted the markets, and some general market microstructure data. For more discussion on topics such as the divergence between the 1-month and 3-month yields, and how macro tailwinds have somewhat faltered over the past weeks check out The Macro Pulse below.
Quant Analysis of Paradigm BTC Block Trades
Take a look here at one of our recent Paradigm Insights pieces, featuring a quantitative analysis of BTC trades blocked through Paradigm. Using a predefined framework to analyze block trade history, one of the biggest takeaways from the report shows individual option legs and call-spreads traded in large sizes typically offer the more valuable insights.v
The Mob Has Spoken
Thanks for taking the time to read our Monthly Brief. Q1 ended with quite a bang, and we are excited to see what else the market throws at crypto in Q2. We stand ready and waiting to serve our clients!
The Paradigm Team 💜