Crypto and regulatory events have a significant impact on digital asset volatility. Last week, a U.S. judge ruled that XRP is not a security and the SEC accepted the BlackRock Bitcoin ETF application, moving it to the next stage of the approval process. Within minutes of this XRP news, the token jumped from $0.45 to $0.61, pushing the price up over 25%.
Greg Magadini, from Amberdata, takes us through crypto and regulatory events and provides some analytics on how these events impact prices and movement. He explains that in the first half of 2023, macroeconomic events splashed news headlines and Bitcoin led crypto higher in January as the Fed’s hawkish narrative began to soften. This move was accompanied by a positive spot/vol regime, with traders buying options as Bitcoin rallied—a relationship not witnessed in 2022 when only price crashes seemed to drive volatility higher.
The SVB banking crisis in February took hold and the YTD performance of BTC and ETH spot prices clearly showed that BTC began an outperformance of ETH in reaction to the banking crisis and the Fed’s emergency response. To see further evidence of a shift in these trading dynamics, the ratio of Deribit’s DVOL indexes, a comprehensive 30-day-to-maturity measure of option implied volatility, shows us that the typical implied volatility premium of ETH over BTC began to dissipate in reaction to macro news events.
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