FTX Crisis Drives Downside Skew Higher in BTC and ETH Options

Summary

This weekly commentary examines how the 2022 FTX liquidity crisis affected Bitcoin and Ether volatility markets. It links the sudden deterioration in confidence around FTX and Alameda to sharp increases in delivered and implied volatility, alongside stronger demand for downside protection. The article says the 25-delta put implied volatilities rose to 1.3 times those of comparable calls at a one-week tenor, the sharpest skew since the June Celsius and Three Arrows Capital crises. It also reports sizeable spot losses in BTC and ETH during the episode.

The author frames the shift as a return toward a closer relationship between crypto and equity volatility, while stressing that this episode was driven by crypto-specific credit and exchange risks. The discussion uses volatility term and skew observations to describe option-market sentiment, not to establish a predictive model or recommend a trade. The commentary was written amid rapidly changing events, and its forward-looking view that downside skew might persist is uncertain; the article provides no later outcome or systematic performance evidence.

Key ideas

• The FTX-related liquidity shock coincided with sharp rises in BTC and ETH delivered and implied volatility.
• One-week 25-delta puts carried substantially higher implied volatility than calls, indicating demand for downside protection.
• The observed skew reached its strongest level since the liquidity crises mentioned from June.
• The author attributes the move to crypto-specific credit and confidence concerns, while treating future skew persistence as uncertain.

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