Reading Crypto Volatility Term Structures and BTC–ETH Skew

Summary

This commentary interprets a November 28, 2023 snapshot of at-the-money implied volatility term structures and SABR smile skew for Bitcoin and Ethereum. Both assets show a rise in implied volatility beginning around the 60-day tenor, near the late-January expiry. The commentary frames a steep term structure as compensation volatility sellers may require for uncertainty beyond recently realized volatility. It also describes shorter-dated implied volatility falling from mid-November while longer-dated levels stayed near 55%, alongside BTC realized volatility near 40%.

One proposed explanation is that traders sold near-term optionality to finance longer-dated positions ahead of an ETF decision, potentially through calendar spreads. The skew comparison adds an asset-specific view: longer-dated BTC volatility favors calls, while ETH skew is more put-oriented at three to six months. These observations suggest differing expectations, but the article presents a dated market interpretation rather than a tested forecast. The ETF narrative and other anticipated catalysts may have shaped positioning, and the snapshot does not establish what caused the patterns or how they performed afterward.

Key ideas

• Both BTC and ETH implied volatility curves show a rise beginning near the 60-day tenor in the cited snapshot.
• The commentary associates steep volatility term structures with an uncertainty premium demanded by volatility sellers.
• It suggests that selling short-term optionality may have helped fund longer-dated positions ahead of an ETF decision.
• Longer-dated BTC skew favors calls, while ETH skew is more put-oriented at three to six months.
• These are dated interpretations of market pricing and do not establish a reliable forecast or causal explanation.

Tags

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