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Paradigm TBP Episode | Hidden Opportunities with Co-Host, Greg Magadini, Director of Derivatives at Amberdata on September 19th, 2023

In this episode of "The Big Picture" featuring QCP Capital, viewers are invited to embark on a comprehensive exploration of the intricacies within the cryptocurrency market. The discussion encompasses a wide array of topics, notably the evolving dynamics of skew within the market. A particular emphasis is placed on Ethereum's put skew when compared to ATM options, with Greg's insightful analysis hinting at the potential overvaluation of Ethereum forwards—a crucial insight for all market participants. Furthermore, the episode ventures into the realm of market surprises, pondering whether certain factors have already been factored into current market conditions. Marty shares his perspective on potential catalysts, and viewers are treated to the illuminating Bitcoin heatmap from Paradigm, offering a visual representation of prevailing market trends. Lastly, the conversation extends to the concept of "Gvol," or implied volatility, shedding light on how dealers strategically position themselves concerning gamma exposure. So let's prepare for an in-depth journey!


Welcome back to the new TBP episode where we have the pleasure of hosting special guests Simon Nursey and Jun Seo Han from QCP Capital. QCP Capital has recently achieved the remarkable feat of holding the highest market maker volume on Paradigm in 2023. Congratulations to the team at QCP Capital for this achievement, and we're eager to dive into today's insightful discussions.

Guest Introductions and Background 

Before we dive into the intricate details of today's topics, we first like to have guests introduce themselves. We've prepared an enlightening episode featuring profound commentary and distinguished guests who are experts in the crypto derivative space.

To kick things off, let's allow Simon and Jun Seo to introduce themselves and provide a glimpse into their backgrounds. They will also share their journeys into the world of crypto derivatives at QCP Capital. Simon, drawing from his experience in running FX options at BNP Paribas and Standard Chartered in Asia, brings a wealth of knowledge to the table. Jun Seo Han, on the other hand, shares his remarkable transition from being a university student to becoming a trader at QCP Capital, offering a unique perspective on the industry.

Analyzing Market Repricing and Skew

Our first point of analysis steps into the intricate world of market repricing and skew. In 2023, the 25 Delta has predominantly favored call options over puts, except for specific events like the Silicon Valley banking crisis. However, a recent downturn in the spot price has prompted a shift in sentiment, with the 2023 options favoring puts over calls. Greg, our resident expert, shares valuable insights into the intricacies of skew and its implications. He highlights a noteworthy aspect of Ethereum's put skew versus ATM (At The Money) options, emphasizing the intriguing opportunities that emerge. Furthermore, Greg identifies Ethereum forwards as potentially overpriced, shedding light on the possibilities of put spreads, particularly in the current market landscape.

Ethereum and Bitcoin Spread Analysis

Transitioning our focus, we explore the widening spreads between Ethereum and Bitcoin. Ethereum, in particular, has witnessed a notable expansion in spreads. The discussion navigates through potential factors contributing to this trend, allowing us to gain a more profound understanding of the market dynamics at play. Notably, the seasonality of September, often characterized as a downward month for Bitcoin, is brought into the spotlight.

Dealer Gamma in the Market

Our conversation takes a deeper dive into options trading, with a specific focus on dealer gamma in the market. Greg, the master of analysis, provides a concise explanation of how dealer gamma is measured and offers insights into its current status. Dealers are identified as having a long gamma exposure, particularly in Ethereum options, which paints a vivid picture of the market landscape.

FTX Asset Sales Impact and Analysis

The discussion naturally leads us to the potential impact of FTX's planned asset sales, an issue that has recently gripped the crypto community. Our esteemed guests weigh in on the matter, offering their expert opinions. They emphasize that the initial market reaction may have been excessive, suggesting that the gradual sale of assets, combined with supportive spot behavior, will likely help stabilize the market. Marty, always one to provide a straightforward perspective, highlights that it's in FTX's best interest to execute a gradual sell-off to maximize returns.

Market Catalysts and Conclusion

In the final stretch of our episode, our guests share their thoughts on potential market catalysts, particularly as we approach Q4. They emphasize the significant supply of coins in the market and how spot behavior, along with gamma positioning, can influence future price movements. With a keen eye on the upcoming Q4, Bitcoin's performance remains a focal point of discussion. Our experts highlight that, in this scenario, Bitcoin is expected to outperform due to the abundance of coins available on the market.

In conclusion, this episode has taken a deep dive into the technical intricacies of market dynamics and options trading. Marty, Joe, Greg, and our distinguished guests from QCP Capital have provided invaluable insights into the world of cryptocurrency derivatives. The nuanced analysis, seasoned perspectives, and meticulous examination of market trends exemplify the caliber of discussions you can expect on The Big Picture.

Stay tuned for more in-depth explorations of the cryptocurrency landscape on The Big Picture, where we strive to uncover hidden opportunities amid the complex world of crypto derivatives.

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