Crypto Derivatives 21 January 2025

Keep up with the latest in crypto market commentary as we share the insights from our institutional research partners.

In this edition, we share the latest crypto derivatives weekly from Block Scholes.

The prelude to President Trump’s inauguration on Jan 20, 2025 saw derivatives markets price in a healthy expectation of “day-one” executive orders, including speculation of the announcement of a Strategic Bitcoin Reserve. Monday’s event followed the launch of two Trump family meme tokens, which themselves drew billions in market cap within hours. However, the inversions of the volatility term structure, the soaring perpetual swap funding rate, as well as the high premium assigned to short-tenor futures contracts have all resolved following a disappointing lack of announcements by the incoming President. Though while at-the-money implied volatility has largely returned to its early Jan levels, the skew towards OTM calls remains strong across the term structure for BTC’s markets

ATM Implied Volatility, 1-Month Tenor

BTC Options

BTC SVI ATM Implied Volatility

Trump’s inauguration saw the largest inversion of the term structure since the U.S. election in November.

BTC 25-Delta Risk Reversal

While less bearish than yesterday, short-tenor smiles remain slightly skewed toward OTM puts despite the rally in the spot.

ETH Options

ETH SVI ATM Implied Volatility

Like BTC, ETH’s term structure of volatility inverted strongly before flattening in the aftermath of Jan 20, 2025.

ETH 25-Delta Risk Reversal

ETH’s skew sees none of the increased bullishness at short tenors that BTC did in the prelude to the inauguration

Market Composite Volatility Surface

Listed Expiry Volatility Smiles

Constant Maturity Volatility Smiles

The information provided in this document by Block Scholes Ltd is for informational purposes only and does not necessarily represent the views of OKX. Any additional disclaimers issued by these third parties are also applicable and should be considered as part of this document.

This report is not intended as financial advice, investment recommendation, or an endorsement of specific trading strategies. The contents of this report, including but not limited to any graphs, charts, and numerical data, are provided “as is” without warranty of any kind, express or implied. The warranties disclaimed include but are not limited to performance, merchantability, fitness for a particular purpose, accuracy, omissions, completeness, currentness, and delays.

The cryptocurrency markets are highly volatile and unpredictable, subject to substantial market risks including significant price fluctuations. The strategies, opinions, and analyses included are based on information available at the time of writing and may change without notice. They are also based on certain assumptions and historical data that may not be accurate or applicable in the future. Therefore, reliance on this report for the purpose of making investment decisions is at your own risk.

Past performance is not indicative of future results. While we strive to provide accurate and timely information, we cannot guarantee the accuracy or completeness of any data or information contained in this report. We are not responsible for any losses or damages arising from the use of this report, including but not limited to, lost profits or investment losses.

Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The inclusion of any specific cryptocurrencies or trading strategies does not constitute an endorsement or recommendation by OKX.