Hi Paradigmers,

This last month the Bitcoin price wasn't the only thing in Up only mode, it would seem our volumes have defied the laws of gravity as well to come back with a vengeance. In January, Paradigm achieved new all-time highs in both options volume (417k $BTC) and options market share (36%).

What a time to be alive!

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A Good Start to a New Year

We’ve wrapped up the first month of the year with an explosive yet exciting start to the new year. Spot volumes have risen, specific altcoin events and token unlocks have driven altcoin price action, both longer-dated macro thesis’ and shorter-dated event-based speculation has come to the forefront of the markets, and explosive after hours trading driven by liquidations have combined to awaken the market from the deep hibernation of December 2022. Inter-dealer trading has fallen as a percentage of total volume as organic buyside taker demand reemerged in both the spot and derivatives markets with more clients expressing directional views.

The biggest events at the front of traders’ minds this month have been the January CPI print, and the February FOMC meeting. We saw demand for upside optionality prior to CPI take place in the form of short-dated OTM calls that ended up paying off massively in BTC. We also saw the ETH Shanghai narrative build as traders speculate on price action post-March expiry in ETH specifically. Volatility has come back to life, skews have shifted to calls being slightly favored, and front-month term-structure faced steep backwardation throughout the month of January as explosive breakout moves during after hours trading started to surface. 

We end the month of January with a noticeable kink in term-structure around the FOMC encompassing expiry, February 3rd, and some interesting volatility term structures developing in ETH as speculators take longer term views on potential event-driven moves after March. BTC is the main asset traders have expressed bullish views on in the short-term as shown by weekly skews favoring calls, whereas ETH weekly skews have slowly reverted to puts trading at a slight premium. It’s a lot more exciting seeing traders starting to buy outright calls and take on some bullish views in the market, especially after the harrowingly quiet end to last year. 

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January Content Highlights

The Big Picture: Gordon Grant of Genesis

Tune in to our most recent podcast episode, where we chat with Gordon Grant, Genesis’ Head of Derivatives. We discuss dealer flows, interesting trade ideas and opportunities in the markets, intricacies of volatility trading strategies and much more. Be sure to check it out for a plethora of trading alpha!

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Gamma The Most Dangerous Greek

As we’ve seen some of the impacts that dealer gamma positioning has had on markets during illiquid times, take this opportunity to become more familiar with the intricacies of this specific Greek and how to take advantage of it.

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Portfolio Margining Systems

Take a look at this in-depth assessment of portfolio margining systems, learn more about what margin is, and how portfolio margining works in crypto. Akhil discusses the need for portfolio margining systems in DeFi, bottlenecks of on-chain portfolio margining, and much more!

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The Mob Has Spoken

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See You Next Month

Thanks for reading this edition of Paradigm monthly. Hopefully, we can carry the positive vibes through the rest of the year and beyond, but these are financial markets so anything is possible.

See you in the next one.

Team Paradigm

Reach out to your rep for details on what we’re building and make sure you ​​follow us on Telegram, Twitter, LinkedIn, and YouTube.

Sincerely,
The Paradigm Team 💜