Amberdata Derivatives Newsletter: Volatility, Rates, and Key Moves

USA Week Ahead (ET):

1. Tuesday 9a - S&P Case-Shiller Home Prices

2. Tuesday 10a - Consumer Confidence

3. Wednesday 8:30a - Durable Goods

4. Thursday 8:30a - GDP (2nd Revision)

5. Friday 8:30a - PCE

6. Friday 10a - Consumer Sentiment (Final)

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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 we had a bullish relief rally in both SPX and crypto assets. Although the FOMC was partly to thank, it wasn’t a clear cut bullish catalyst. 

The FOMC rate decision remained unchanged (as expected) but the overall message was mixed. 

Most of the Fed governors now expect two rate cuts for 2025 (this is dovish/bullish) while Powell tempered enthusiasm by explaining that the economic trajectory is highly uncertain due to potential tariff inflation, which personally keeps him skeptical about rate cuts. 

Powell fears stagflation as tariffs impact inflation, supply, and growth. 

Chart: Daily VIX chart (ThinkOrSwim)

Chart: Daily VVIX chart (ThinkOrSwim)

As the market recovered this week, VIX and more importantly VVIX continue to breakdown lower, as the cost of SPX insurance drops and the cost of insurance on the insurance drops even more. 

VVIX is back to US pre-election cycle lows, seen back in June. 

If VIX optionality is this cheap, I don’t see much “crash risk” for the SPX market right now, it’s too cheap too hedge. At least in the short-term.

This week is have the PCE reading on Friday, the Fed’s preferred inflation gauge. The market is looking towards the April 2nd, tariff implementations, as a market moving catalyst. 

Consumer confidence has been a weak point in economic data recently, although the data is very partisan breaking down between Republican and Democrat lines. Another reading is schedule for 10am on Friday. 

Lastly, although the markets likely remain stable in the short-term (due to cheap VVIX) it’s important to keep in mind the current P/E valuation for US equities. 

Current P/E valuations for various equity indices are:

US = 24.6 

Europe = 18.7

Hang Seng = 13

South Africa = 13

I can’t imagine there isn’t another cycle of downside price action in the medium term, given uncertainty and the unwillingness of the administration to rule-out a potential recession. 

BTC: $85,028 (+1.3% / 7-day)

ETH :$1,998 (+4.6% / 7-day)

SOL :$131.59 (+1.0% / 7-day)

Crypto Options Overview

Bitcoin prices followed the S&P 500 higher this past week. I continue to think that crypto will move in tandem with macro risk-assets. 

Crypto is an extension of the “Trump-Trade” in my mind and will be driven by similar narratives. 

Chart: Realized VRP BTC

We can see that when markets recovered this past week, realized volatility underperformed implied. Short-dated volatility displayed a positive VRP for sellers and a strong “negative rr-skew” theme (since vol. came down as prices rallied).

Chart: BTC DVOL index

The Dvol index (above) shows a consistent drift lower throughout the week as BTC trades back above $85k again. 

Chart: BTC ∆25 Risk-Reversal

Short-term ∆25 RR-Skew is reflecting the current negative spot/vol themes, but anything beyond 60-days is pricing positive spot/vol. 

I think there could be an opportunity to fade the positive spot/vol, 60+ dte as I continue to think macro risk-assets will experience another downward cycle (bringing VIX higher) in the medium term, I’d be surprised if we were completely out of the woods already. 

I expect BTC and crypto in general to follow-suit, should SPX make new YTD lows. 

CME Press Release for Solana Futures Launch

Another very exciting development was the launch of SOL futures trading on CME this past Monday. I think the launch of additional altcoin futures and ETF products is a net positive for the space but a net negative for ETH in particular. 

As institutional investors begin to diversify their crypto holdings, altcoins (such as ETH) will likely begin to see investors selling in order to buy other alts (such as Solana).

Chart: SOLT (2x Solana ETF) via ThinkOrSwim

A 2x Solana ETF (called SOLT) has already started trading on top of these CME futures. The volumes/holdings are still quite low but I do expect options to be listed, I also expect spot ETFs for SOLANA to start trading soon as well. 

Chart: SOL ATM IV 

Although crypto volatility probably continues to come down with VIX and macro risk-assets, Solana ATM volatility seems like a decent long.

Currently SOL IV is around 80% while the realized volatility of SOL is below 75%, only 25% of the time… with a 60% minimum in the past 12-months.

Chart: SOL Realized Vol. 1yr

The new product launches for SOL could easily be a catalyst to move SOL volatility higher.

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 TVL remains at $100 million despite significant downward moves in the crypto market

Derive to launch basis trading vaults for LBTC and weETH in the next week, allowing users to earn perp basis yield (averaging ~10-15%) while still maintaining exposure to the underlying asset and associated yields. 

Most traded instruments on Derive were the March21 81K and 84K puts as traders seek further downside protection in choppy markets. 

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.