Reading BTC and ETH Options Volatility During March 2023 Market Shocks

Summary

This monthly review explains how macroeconomic announcements and banking stress shaped BTC and ETH options volatility in March 2023. It tracks at-the-money implied volatility across maturities, the volatility smile’s skew, and differences between the two assets. Bank failures and the USDC depeg coincided with higher volatility expectations and stronger demand for downside protection; after the depeg was restored, BTC skew shifted, and a late-month spot rally increased demand for short-dated upside exposure. The expected Federal Reserve rate increase was followed by a sharp drop in short-term volatility.

The review reports that ETH options typically carried higher implied volatility than comparable BTC options, relating this partly to ETH’s higher realized volatility and greater exposure to stablecoin and banking links. It notes ETH’s more persistent put skew and attributes its late-month persistence partly to falling implied volatility in out-of-the-money calls. These are event-based interpretations of a single month, supported by market data and charts rather than a predictive test; the authors also say the causes of ETH’s higher realized volatility are not fully clear.

Key ideas

• Macro announcements and banking concerns coincided with repricing of crypto options volatility and skew.
• The USDC depeg episode brought increased demand for downside protection, followed by a skew reversal after the peg recovered.
• The expected rate hike was followed by lower short-term volatility expectations.
• ETH options showed higher implied volatility and more persistent downside skew than BTC options in the review period.
• The authors connect ETH’s risk profile to stablecoin and traditional finance links, while acknowledging uncertainty about the causes.

Tags

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