Amberdata Derivatives NL: Impact of Trump Inauguration on BTC & ETH

Last week's crypto market volatility was driven by political catalysts, including pro-crypto moves from the Trump administration, SEC leadership changes, and macroeconomic anticipation ahead of key FOMC, GDP, and inflation data. Bitcoin options showed efficient risk pricing, while Ethereum underperformed due to IV overpricing, though potential tail risks and speculative catalysts could drive sudden shifts. Learn more in this week's newsletter!

USA Week Ahead (ET):

1. Tuesday 10:00am - Consumer Confidence

2. Wednesday 2:00pm - FOMC Rate Decision

3. Thursday 8:30am - GDP

4. Friday 8:30am - PCE

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Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.

Authors have holdings in BTC, ETH, and Lyra and may change their holdings anytime.

MACRO Overview

Last week the inauguration was a major vol. catalyst for crypto. We had an overall positive vibe for crypto from the Trump admin as Ross Ulbricht was pardoned, Trump announced (Davos) that the USA will be and should be the crypto and AI capital of the world, and new ETF fillings were made as Gary Gensler stepped down. 

The current SEC acting chairman, Mark Uyeda, is anti-regulation and crypto friendly and will be in power until Paul Atkins is confirmed as the new SEC chairman. 

The macro side of the world remains driven by both inflation and economic strength.

This week we have the January FOMC rate decision, according to the CME FedWatch tool (see below) it’s a forgone conclusion that there will be no rate cut. 

Chart: CME FedWatch Tool

Probability is 99.5% for unchanged rates today (vs. 89.3% 30-days ago). 

Later in the week, after FOMC, we will also have the Q4 GDP numbers (expected around 2.5%) and the PCE inflation data. 

The PCE is the Fed’s preferred inflation gauge, which means this upcoming week contains datapoints for all the US macro monetary policy drivers; FOMC rates and guidance, GDP strength and inflation data. 

BTC: $104,945 (+0.8% / 7-day)

ETH :$3,337 (-2.1% / 7-day)

SOL :$256.75 (-4.4% / 7-day)

Crypto Options Overview

The inauguration clearly had volatility event-risk being priced by the options market. Another good sign for the maturity of the crypto volatility markets “paying attention”. 

In terms of variance risk premium, the Bitcoin event-risk was pretty well priced.

We can see below, the IV vs RV line chart (unshifted) showing peak 7-day IV was nearly perfectly priced for the subsequent 7-day RV. 

The chart below shows the Past IV w/ current RV, think of it as the shifted VRP or “Actualized VRP”.

The IV pricing was on point!

This might be a factor of IBIT market players helping price Bitcoin options more efficiently. 

Ethereum on the other hand paid volatility sellers, as the IV spike was overpriced. 

Ethereum IV has been carrying a volatility premium to Bitcoin, which likely caused the inauguration to underperform for ETH RV. Since this was macro focused, hence affecting BTC more directly. 

That said, I do think there’s a bit of “tail” risk for Ethereum on the table. 

Elon is looking to incorporate BlockChain into DOGE (Maybe DOGE coin, but maybe ETH L1 or L2… Maybe SOL?) it’s all hard to tell. 

I wouldn’t completely discount an Ethereum wildcard appearing. 

June options are only pricing 15% density above the $5k all-time highs. 

The ETH/BTC price has been extremely beat up, which means any reversion higher could potentially be a “squeeze” back higher (or a complete breakdown if the market ditches ETH for SOL). 

Right now, my base case is lower ETH prices BUT there’s likely a good 1x2 vol structure possible (sell 1x call, buy 2x calls, short eth perps to flatten delta to neutral)

6-month IV looks around “mid” here, but a right-tail announcement would send ETH soaring higher, very fast. 

In terms of realized volatility, RV isn’t high here… 180-day RV is around the lower 25% percentile for the past 5yrs of data. 

The upper 75% percentile limit would be 100-IV (+30pts gain for IV)

Any REAL surprise though could challenge the top of the MAXIMUM RV. 

Given that Trump wallets are buying ETH (as well as other cryptos) it makes me think we can’t completely discount any ETH surprise. 

A delta neutral 1x2 would also gain from a complete breakdown of ETH, or course.

Paradigm's Week In Review

Paradigm Top Trades This Week

Weekly BTC Cumulative Taker Flow 

ETH Cumulative Taker Flow

BTC Cumulative OI

ETH Cumulative OI

BTC

ETH

• Derive traders appear bullish on BTC with almost 5x as many calls in OI as puts

• BTC ATM IV for the 7 and 30 day tenors have flattened out at around 52% after a spike to 82% (for the former) in the lead up to Trump’s inauguration

• The Derive token has launched!
• Total value locked on Derive chain is currently at $170M, up from $7M this time last year
• Derive’s borrow market currently sits at 4.8% APY - one of the lowest in DeFi
• ETH’s most traded instrument on Derive is the ETH-20250131-3900-C - potentially reflecting bullish sentiment of near $4K ETH by end of month.

AMBERDATA DISCLAIMER: The information provided in this research is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information in this report constitutes, or should be relied on as a suggestion, offer, or other solicitation to engage in, or refrain from engaging, in any purchase, sale, or any other investment-related activity. Cryptocurrency investments are volatile and high risk in nature. Don't invest more than what you can afford to lose.