Crypto Volatility in 2023: ETF Event Risk and the 2024 Macro Outlook
Summary
This annual review links 2023 crypto volatility and trading volume to market events, then considers risks for the coming year. It describes unusually low realised volatility and weak spot volumes for BTC and ETH, followed by a recovery in both as the spot ETF narrative gathered force. Options pricing reflected event risk ahead of the anticipated BTC ETF decision: a premium appeared at later expiries and created a moving kink in at-the-money volatility term structures. The authors compare implied with realised volatility and examine ETH volatility relative to BTC’s.
The discussion then broadens to monetary policy, inflation, employment, growth, and Bitcoin’s relationship with equities and gold. It argues that optimistic soft-landing expectations could leave risk assets vulnerable to repricing if economic data disappoint. The evidence is historical and descriptive, supported by charts and rolling volatility, premium, and correlation measures; it does not establish that ETF news or macro conditions caused each move. The document is also incomplete in the supplied text, and its forward-looking claims reflect the authors’ outlook at publication rather than a tested forecast.
Key ideas
- BTC and ETH realised volatility and spot trading volume reached low levels before recovering later in the year.
- Anticipation of a spot BTC ETF was associated with an options premium at expiries around the expected decision date.
- ETH volatility moved closer to BTC volatility after the Merge, though the text leaves open whether this reflects a structural change.
- The authors compare implied and realised volatility to assess how option prices compensate for volatility risk.
- The outlook warns that optimistic soft-landing expectations may amplify repricing if macroeconomic conditions disappoint.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.