What We See in the Markets: June 11, 2023

I never will forget those nights

I wonder if it was a dream

Remember how you made me crazy?

Remember how I made you scream

Now I don't understand what happened to our love

But babe, I'm gonna get you back

I'm gonna show you what I'm made of

I can see you, your brown skin shinin' in the sun

I see you walking real slow and you're smilin' at everyone

I can tell you, my love for you will still be strong

After the boys of summer have gone

What We See in the Markets

After some initial excitement around the approval of the BTC ETF, volatility has died down again with BTC unable to break above 31K. BTC JUL 50D IV is now back to 40 and ETH vol now sits at 38, which is down ~7 vols from just a week ago. Overall, due to the heavy supply, the term structure looks particularly depressed in AUG & SEP expiries. Looking further down the curve, we see some demand for long dated calls spreads (eg. JUN 2024) from investors who do not want to deploy more in spot but have positive view of ETF approval. Amidst the BTC outperformance from the past few months along with the dampening of ETH vol from, the distribution for Cumby Ratio (BTC Vol / ETH Vol) has both narrowed and shifted upward. Currently, the Cumby Ratio sits at 106% for JUL, and has realized at around 95% for the last 6 months. This is in sharp contrast to the pre-merge range of ~65% to 85%.

Potential Trade Ideas

Buy JUL 28K BTC Puts / $26.7K break even Especially for investors who have been long coming into the run up to 31K, this is a good chance to buy some relatively cheap downside protection against any headlines surprises especially given the intense regulatory scrutiny around Binance. For those who are not looking for a hedge but purely as a vol trade, one could also construct the position as delta hedged, as vol would likely spike in a sell off.