Crypto Options Analytics, May 5, 2024: Macro Recap & BTC Vol Analysis

In the latest AD Derivatives newsletter, the focus is on a macroeconomic recap, emphasizing a slowdown in job growth and a balanced market sentiment. With minimal major news events expected, the forecast anticipates dropping volatility and stable markets. Additionally, we discuss Bitcoin's recent performance, suggesting a potential trend toward lower volatility and analyzing trading strategies within Bitcoin's current consolidation range.

USA Week Ahead:

1. Throughout the Week: Fed governors speak

2. No big economic announcements

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 Recap

Although last week had a large amount of important economic releases, this upcoming week is virtually quiet (for the exception of Fed governor appearances).

The NFP number came in with +175k jobs for April (vs) +315k in March. The services sector showed only a slight increase of +5k (vs) +53k in March, suggesting that there’s finally some slack in the tightest part of the labor market. 

Finally, the Unemployment rate actually ticked up from 3.8% → 3.9% while the average hourly wages dropped to +3.9% (y/y) (vs) 4.1% in March and 4.3% in Feb. 

All taken together, we’re seeing a welcome softening in the latest jobs report. This is a slowdown but also nothing that’s completely gloomy and disastrous. A perfect balance. 

Last week the stock market rallied, VIX dropped and bonds rallied. 

Without any major news events this week, I expect to see vol continue to drop and markets close the week nearly unchanged. That’s my “base case”. 

Chart: (/ES 5-day 15min chart ThinkOrSwim) 

Chart: (VIX 5-day 15min chart ThinkOrSwim)

Chart: (Bond Futures /Zb 5-day 15min chart ThinkOrSwim) 

BTC: $64,082 (+0.8% / 7-day)

ETH :$3,151 (-5% / 7-day)

SOL :$147.28 (+4.9% / 7-day)

Chart: (BTC 12-month Realized Volatility Cone) 

Realized volatility continues to be in the upper 75% percentile for the past 12-months. 

Although 2023 was a historically low volatility year for BTC and therefore the past 12-months are statistically lower than the past 5-years, I do think BTC is likely going to continue to have structurally lower volatility.

Current 30-day realized sits at 64% while the 30-day median is 44%. This gives us a lot of room to see volatility move lower. 

Chart: (BTC ATM Implied Volatility) 

We can see here that the past year of IV term structure looks to have topped out in early April. We’re still currently seeing elevated IV that matches the October 2023 “$30k breakout”. 

Given the context of volatility events having now passed: Israel conflict, spot ETF, ETF inflows and halving… What’s there left to keep volatility elevated? 

Fundamentally I only see lower volatility. 

Chart: (BTC ∆25 RR-Skew normalized by ATM volatility) 

Lastly, looking at the ∆25 RR-Skew, we can see that short-term RR-Skew (7-day and 30-day) have been able to get back into positive territory over the weekend. 

NFP seemed to have weakened the dollar and lifted asset prices higher, including BTC, but BTC remains in a consolidation range here (in my opinion). 

Selling the RR-Skew in a delta neutral manner is also another interesting way to trade there current “consolidation” range.

Paradigm's Week In Review

BTC -1.07% / ETH -5.15% / NDX +0.48%

Paradigm Top Trades this Week 👇

Weekly BTC Cumulative Taker Flow 🌊

Weekly ETH Cumulative Taker Flow 🌊

BTC Cumulative OI 

ETH Cumulative OI

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BTC

ETH

The Squeethcosystem Report

Crypto markets remained active, ending the week down. ETH ended the week -4.66% and oSQTH ended the week at -10.80%.

Volatility

oSQTH IV remained firm throughout the week ending in the 70s.

Crab Strategy

Crab saw gains ending the week +0.38% in USDC terms.

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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.