Why ETH Volatility has Awakened With SEBA Bank Switzerland

Paradigm TBP Episode | Why ETH Volatility has Awakened with SEBA Bank Switzerland With Amberdata Co-Host, Greg Magadini, Director of Derivatives at Amberdata on October 9th, 2023

In the latest TBP Paradigm podcast episode hosts Joe Kruy at Paradigm, Marty, a crypto Twitter/X phenom, and Greg Magadini, Director of Derivatives at Amberdata, engage in an in-depth discussion with Dennis Ehlert 
crypto derivatives trader at SEBA Bank in Switzerland's Crypto Valley. SEBA Bank, a Swiss-regulated institution, specializes in managing, investing, and storing digital assets. Dennis Ehlert covers various crucial subjects, starting with a concise introduction and sharing his background, Dennis paves the way for a discussion on the divergent volatility of Bitcoin (BTC) and Ethereum (ETH). The highly awaited Bitcoin ETF is examined, alongside an in-depth analysis of cryptocurrency market volatility.

Dennis's Technical Insights

Background and Role at SEBA Bank

Dennis, an options trader at SEBA Bank, provides liquidity for crypto options through over-the-counter (OTC) transactions in Switzerland. With over two years at SEBA, Dennis brings a traditional finance background, having worked as a portfolio manager for multi-asset funds for eight years before transitioning to crypto in 2017-2018.

Crypto Market Dynamics and Implied Volatility

The conversation begins with a focus on the evolving dynamics between Bitcoin (BTC) and Ethereum (ETH) volatility. Dennis dives into the intricacies of implied volatility spreads, attributing the recent shift to factors such as consistent overriding supply, the impact of BlackRock's ETH ETF filing, and the ongoing transformation of Ethereum into a yield asset post the Shanghai upgrade.

Term Structure Analysis

Greg takes the lead in analyzing the term structure in crypto markets, emphasizing the role of the variance risk premium and the ever-changing regulatory landscape. He goes in-depth into the nuances of term structure movements, particularly in the context of the ETF deadline during the January expiration cycle.

Spread Trading Strategies

The hosts explore spread trading strategies, honing in on the Ethereum versus Bitcoin volatility spread. Detailed analysis of recent trades, including the buying of BTC straddles and selling of ETH straddles, sparks discussions about potential reversion trades and the complexities of managing risk.

Regulatory Framework in Switzerland

Dennis provides technical insights into Switzerland's regulatory framework, detailing key milestones since 2014. He emphasizes the categorization of digital assets within ICO regulations, the guidelines on stablecoins in 2019, and the pivotal DLT bill of 2021, recognizing distributed ledger technologies for trading, custody, settlement, and clearing of securities.

Structured Products and Options Market

The hosts take it further into the popularity of structured products in Switzerland, examining the advantages they offer, including investor protection, transparency, and tax efficiency. Dennis sheds light on the use of plain vanilla options within structured products and highlights the cautious approach to introducing exotic options, particularly among institutional players.

Institutional Adoption and Client Perspective

Technical details emerge as Dennis discusses the role of regulated entities like SEBA Bank in offering legal clarity, security, and assurance to clients. The advantages, including compliance standards, fraud risk reduction, and stability, contribute to a technical understanding of the institutional landscape navigating the crypto market's volatility.

Challenges and Growth of Structured Products

The episode concludes with a technical exploration of challenges and potential growth in the structured product market. Dennis offers insights into the client perspective, underlining the importance of regulatory clarity and the pivotal role of institutions in supporting the technological revolution fueled by blockchain technology.

Conclusion

Overall, the episode provides a technical deep dive into recent market trends, regulatory dynamics, and the intricate landscape of structured products in Switzerland. The technical details shed light on the complexities of the crypto options market, institutional adoption, and the evolving regulatory environment.