Bitcoin Volatility Demand
Crypto Market Week in Review (24 March 2023)
Markets
This week stocks were largely flat and most bond prices modestly advanced. Short-term bond yields continued dropping, 2-year US Treasuries yield reached the lowest level since September 2022. The most important news of the week was the policy meeting of the US Federal Reserve. The Fed hiked rates by 25 bp, but suggested a much shallower path for further tightening. That was largely in line with the market expectations.
On Thursday Coinbase stock plunged 16% on the news of the US Securities and Exchange Commission (SEC) issuing a so-called Wells notice. The company was warned about potential violations of US securities law. Coinbase stock failed to break its early February high despite the Bitcoin rally, and technicians may see a double top in the stock chart.
Coinbase stock price (USD)
In other regulatory crackdown news, Justin Sun and several celebrities were charged by the SEC. The essence of the SEC allegations against both Justin Sun and Coinbase is that some of the tokens offered or advertised were unregistered securities.
Cryptocurrencies shrugged off regulatory woes, continuing growth albeit at a much slower pace. Bitcoin was up by 3% since the last Friday close and Ethereum added just about 1%. Ripple (XRP) rallied by 17% on optimism that the company will win its legal battle against the SEC.
The implied volatility of both Bitcoin and Ethereum was flat (as measured by DVOL indexes). The ratio of Bitcoin’s implied volatility to Ethereum’s one continued to hover around 1.05, which is a historically low level.
The Bitcoin rally ignites a lot of new interest in option trading. Bitcoin option open interest skyrocketed in the last two weeks, reaching an all-time high. Deribit data shows the most popular option is a $30,000 call.
Capitalizing on volatility demand, Deribit announced that it would start trading DVOL futures at the end of March.
Bitcoin option open interest
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