Reading Crypto Options Volatility and Skew During a Market Selloff

Summary

This market commentary examines how a broad crypto selloff affected Bitcoin and Ether spot prices, derivatives funding, and options markets. It describes sharply negative funding as a sign that accumulated long positions were likely liquidated, alongside an inverted volatility term structure as traders sought short-term downside protection. The report compares at-the-money implied volatility and 25-delta risk reversals across the two assets and different maturities.

The stated evidence is that short-dated options shifted toward put skew, while longer-dated volatility smiles stayed tilted toward out-of-the-money calls. Short-tenor skew later recovered more for Bitcoin than for Ether, and Ether volatility traded above Bitcoin’s across the term structure. The report says implied volatility did not exceed year-to-date highs, suggesting the episode had not changed longer-term expectations as much as near-term risk pricing. These are observations from one market episode, not a tested trading strategy or proof of future price direction; the source also cautions that its data and analysis may be incomplete or change over time.

Key ideas

• Negative funding during the selloff was consistent with the liquidation of accumulated long positions.
• The volatility term structure inverted as traders priced greater near-term downside risk.
• Short-dated options skewed toward puts, while longer-dated smiles remained tilted toward out-of-the-money calls.
• Ether options showed higher volatility across maturities and a slower short-tenor skew recovery than Bitcoin options.
• The report describes market conditions rather than testing a trading strategy or establishing a forecast.

Tags

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