Bitcoin Derivatives Market Still Nervous About USDC: Lingering Uncertainty After De-Peg
The Bitcoin (BTC) derivatives market is still exhibiting nervousness surrounding USDC, even after the stablecoin's recovery. This unease stems from the earlier de-pegging episode triggered by the collapse of Silicon Valley Bank (SVB), which unlocked a plethora of fears within the cryptocurrency sector. Despite USDC now trading at $0.99, the market shows lingering concerns.
Implied Volatility Spread Highlights Market Anxiety
The re-pegging is yet to calm nerves in Bitcoin's derivatives market. A tell-tale sign of this anxiety is the persistent implied volatility (IV) spread between different exchanges. Deribit-listed options contracts settled in BTC trade at a higher implied volatility premium than Bybit's contracts. Andrew Melville, research suggests this positive spread of Deribit option-to Bybit option-implied volatility persists, indicating a higher level of perceived risk associated with positions on Deribit.
Bitcoin Futures See Significant Activity
The market for regulated Bitcoin derivatives has grown significantly, offering traders sophisticated tools and leverage. Bitcoin futures on the Chicago Mercantile Exchange (CME) have reached impressive heights, with open interest exceeding USD 19 billion. This demonstrates the increasing institutional participation and maturity of the Bitcoin derivatives market.
Recent Market Volatility and Liquidations
The cryptocurrency markets experienced a wave of liquidations recently, with Bitcoin (BTC) prices slipping. This price movement triggered over $600 million in forced closures of bullish futures positions. These liquidations highlight the inherent volatility of the cryptocurrency market and the risks associated with leveraged trading.
Derivatives Market Impact on Bitcoin Price
On March 12, Bitcoin futures traded 5.5% below regular spot exchanges, causing volatility in derivatives markets. However, the price of Bitcoin (BTC) increased by 14.4% overall, showcasing the complex interplay between spot and derivatives markets.
Conclusion: USDC's Shadow Looms
While USDC has recovered, its de-pegging incident continues to cast a shadow over the Bitcoin derivatives market. The elevated implied volatility and liquidation events serve as reminders of the inherent risks and complexities involved in trading Bitcoin derivatives. Market participants should exercise caution and carefully assess their risk tolerance before engaging in such activities.