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Buying BTC Gamma and ETH Back-End Volatility in a Changing Regime

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Summary

This commentary argues that crypto volatility may be underpriced after markets adjusted to the unusually quiet conditions of late 2022. It attributes the prospect of larger moves to thinner post-FTX order books, changing macro expectations, and renewed crypto-specific catalysts. The author reviews a prior BTC gamma position, noting that implied volatility rose around a rally and a central bank event, while spot moves also created gamma-hedging gains.

The report weighs dovish central bank signals against stronger-than-expected US employment data, framing upcoming inflation releases as possible catalysts for either direction in risk assets. It also points to Ethereum activity, fee burns, and planned upgrades as potential sources of reflexive price action. Given the cited volatility surface, it favors BTC gamma and longer-dated ETH volatility, with gains potentially taken as volatility rises or relative pricing normalizes. This is a time-specific market view, not a tested general strategy; event outcomes, volatility levels, and liquidity can change quickly.

Key ideas

  • The commentary attributes potential volatility mispricing to thinner liquidity and a wider range of macro and crypto catalysts.
  • A prior BTC gamma position benefited from rising implied volatility and large spot moves, according to the report.
  • Conflicting central bank and employment signals create two-sided risk for digital assets.
  • The author sees Ethereum activity and upgrades as possible drivers of reflexive demand and supply effects.
  • The report favors BTC gamma and longer-dated ETH volatility, but its thesis depends on changing market conditions.

Tags

CryptoOptionsVolatilityOn-chain data

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.