Crypto Volatility After Market Crises: Reading the Surface and Timing Repricing
Summary
The article assesses whether falling crypto options volatility after the FTX-related market shock was premature. It tracks dVol, a measure that incorporates skew, alongside at-the-money implied volatility and the BTC–ETH dVol spread. The author notes that risk premium had declined, spot prices had tightened into a range, and the relative volatility spread between ETH and BTC had compressed from its earlier expansion.
To frame how long volatility might remain elevated, the article compares BTC volatility after Terra/Luna and the 3AC collapse with the then-current FTX-related episode. It observes that the 3AC period included repeated volatility rebounds and argues that the newer event’s broader contagion could prolong normalization. The author therefore favors buying volatility on near-term dips. This is a time-specific opinion, not a tested trading rule: the article acknowledges limited historical crisis data and says the latest episode may differ in scale and contagion from prior events.
Key ideas
- dVol incorporates volatility skew as well as at-the-money volatility when describing the options surface.
- Historical crisis episodes can offer context for volatility normalization, but the available sample is limited.
- The article compares volatility paths following Terra/Luna, 3AC, and the FTX-related shock.
- The author interprets declining volatility as potentially premature and favors buying near-term dips.
- A crisis with greater contagion may behave differently from earlier episodes, limiting historical comparisons.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.