The trading volume of single-period stocks and options of Bitcoin and Ethereum hit a record high, and the number of positions held has increased exponentially, reaching new highs. The one-month realized volatility of Bitcoin and Ethereum rose to 85% and 119%, respectively, setting new highs since June last year. The implied volatility of one-month at-the-money option (ATM) was 122.7% and 163%, respectively.
Written by: Karen
Weekly market dynamics
- Huobi Futures launches currency-based delivery contracts that support daily settlement.
- Deribit has launched Bitcoin options with an exercise price of US$200,000 and Ethereum options products with an exercise price of US$10,000.
Overview of Funding Trends in Derivatives Exchanges
In the past week (January 1st to January 7th), there was a net inflow of 15,628 bitcoins in the wallets of cryptocurrency derivatives exchanges, while Ethereum continued to show a net outflow, with 469,295 outflows in a week.
Net Bitcoin flow in the wallet of derivatives exchange, source: CryptoQuant
Ethereum net traffic in the derivatives exchange wallet, source: CryptoQuant
As of January 7, the number of bitcoins held in the wallets of derivatives exchanges was approximately 1,193,400. Although it was a sharp drop from the 1.63 million in mid-May 2020, it was an increase from the low point one month ago. , The increase is about 6%.
Bitcoin reserves on derivatives exchange, source: CryptoQuant
Futures market
Overview of extreme market liquidation
In the past week, Bitcoin rose sharply by more than 30% and exceeded the $40,000 mark. On January 3, Bitcoin liquidated a total of US$709 million and Ethereum liquidated US$102 million. On January 4, Bitcoin retreated to US$27,800 and quickly rebounded above US$30,000 on the same day, with a total of US$880 million. Ethereum liquidated its position for USD 333 million. Within half an hour from 2:30 in the morning today, Bitcoin surpassed $40,000 and then fell back to more than $3,800. During this period, the entire network broke down by $230 million.
BitMEX, Binance, Bybit, Huobi and OKEx five exchanges’ Bitcoin futures liquidation data statistics, source: Coin
Trading volume
The statistical scope of Bitcoin futures includes BitMEX, Binance, Bitfinex, Bakkt, Bybit, CME, Deribit, FTX, Huobi and OKEx. The statistical scope of Ethereum futures includes BitMEX, Binance, Bitfinex, Bybit, Deribit, FTX, Huobi and OKEx.
The trading volume of Bitcoin futures has increased significantly, with a single weekly trading volume hitting a record high. The trading volume in the past week reached nearly 500 billion US dollars, an increase of nearly 70% from the previous month. It can be seen that as Bitcoin continues to refresh historical highs, the market’s enthusiasm for participating in futures is also increasing.
Bitcoin futures contract trading volume, source: Skew
Ethereum’s weekly trading volume also hit a new high, which was US$191.2 billion in the past week, an increase of nearly 160% from the previous week. At present, the price of Ethereum is still about 20% away from the historical high of $1450.
Daily trading volume of Bitcoin futures contracts, source: Skew
Open positions
The value of Bitcoin holdings also increased exponentially, continuing to hit a record high. As of January 7, it was approximately US$12 billion, an increase of over 26% this month.
Open positions in Bitcoin futures contracts, source: Skew
The open position of Ethereum has also surged since the beginning of the year and hit a new high. As of January 7, it was 3.6 billion US dollars, an increase of over 80% from the previous day.
Open positions in Ethereum futures, source: Skew
Funding rate
In the past week, with the exception of Bitfinex, the average weekly funding rate for perpetual contracts on other exchanges was positive and showed a gradual upward trend. It’s worth noting that Binance’s weekly average funding rate is as high as 0.1049%, and Bybit and BitMEX’s funding rates are also above 0.055%. In contrast, Binance’s average funding rate over the past three months is 0.0250%. This means that the current market is crazy, and caution is needed in the short term.
Comparison of Bitcoin Perpetual Contract Funding Rates of Various Exchanges
In terms of Ethereum, BitMEX’s weekly average funding rate reached 0.2519%, which is also a significant increase from the average rate of 0.0543% in the past three months.
Comparison of Ethereum Perpetual Contract Funding Rates of Various Exchanges
Option market
Trading volume
The scope of Bitcoin options statistics includes Bakkt, Bit.com, CME, Deribit, Huobi, LedgerX and OKEx. The scope of Ethereum options statistics is Deribit, Huobi and OKEx.
The trading volume of Bitcoin options also hit a new high in a week, increasing by more than 81% to nearly US$9.4 billion. Among them, except for the CME or the New Year’s Holiday, which resulted in a decrease of more than 13% in trading volume, the trading volume of other exchanges increased significantly, and the trading volume accounted for Deribit, which has a ratio of nearly 87%, increased by over 90% from the previous month.
Bitcoin options daily trading volume, source: Skew
Ethereum’s weekly trading volume also doubled month-on-month, reaching $1.312 billion. Among them, Deribit’s trading volume increased by 116% from the previous month, and Deribit’s trading volume has always been around 85%.
Ethereum options daily trading volume, source: Skew
Open positions
Although Bitcoin option holdings decreased by more than 40% on the quarterly delivery date on December 25 to US$4.776 billion, they quickly recovered in the next few days and continued to increase the historical record, breaking through US$10 billion, reaching 105.10 as of January 7. Billion US dollars, an increase of more than 67% from a week ago.
Open positions in Bitcoin options, source: Skew
Ethereum option holdings have also reached new highs, which doubled from a week ago, reaching US$1.852 billion as of January 7.
Open positions in Ethereum options, source: Skew
Volatility
Bitcoin’s one-month realized volatility has risen to 85%, a new high since June last year, while the value was only 35% 3 months ago. At the same time, the implied volatility of one-month at-the-money options (ATM) has risen sharply to the current 122.7%.
From left to right are the realized volatility of Bitcoin one month and the implied volatility of Bitcoin one month ATM
The one-month realized volatility of Ethereum has also increased from 81% on January 1 to the current 119%, and the one-month at-the-money option implied volatility is currently 163%. However, from a longer range, there is still a long way to go before May 2020.
From left to right are the one-month realized volatility of Ethereum and the one-month ATM implied volatility of Bitcoin
Implied volatility measures market expectations of future volatility. An increase in implied volatility means a corresponding increase in the time value of the option, and vice versa means a decrease in the time value. In other words, if the volatility can be predicted more accurately, then you only need to buy when the volatility is high and sell when the volatility is low, and you can achieve better returns.
In summary, the trading volume of futures and options of Bitcoin and Ethereum both hit record highs, and the value of holdings has continued to climb to continue to brush historical records. Although there is still room for volatility compared to May last year, it is currently at a relatively high level. Participants must pay close attention to the sharp fluctuations in prices while participating in derivatives.
Option expiration
Today, 44,000 Bitcoin option contracts will expire, with a notional value of more than $1.76 billion.
Bitcoin option expiration, source: Skew
In terms of Ethereum options, 240,300 contracts will expire today, with a nominal value of approximately US$300 million.
Ethereum option expiration status, source: Skew
