Hi Paradigmers,

Even though the crypto world is burning and most coins are down 95%, you can take solace in the fact that we can – and probably will – go lower. So clutch your anime body pillow, start softly sobbing and get ready for the barrage of questions from angry family members over the holidays.

That being said, let us distract you from your pain – here are some things we found interesting over the last month.

A Deep Dive Into Macro and Skews

November marks a difficult month for crypto, with the FTX implosion setting off a renewed liquidity cascade and more importantly, a dent in the institutional confidence in the digital asset ecosystem. Longer term, of course, this will be the catalyst that drives greater transparency and more effective solutions to deal with credit/counterparty risk and Paradigm as a non-custodial liquidity network stands ready to capitalize.

Volatility is Paradigm's friend and the FTX collapse drove continued strong volumes, sparked by a knee-jerk rush for downside protection. However, a weaker U.S. inflation print and a "peak inflation" narrative saw a huge rally in boomer stocks, crypto prices stabilized and early bearish positions unwound with some new topside risk established.

Skew for BTC had initially begun with the 25 delta calls trading at a slight premium to the puts but were quickly blown out with 25 delta puts trading at around 40 IV higher with skew in ETH following a similar pattern. Ending the month, skew for both ETH and BTC now show 25 delta puts trading around a 15-20 IV premium. Term structure initially saw a sharp backwardation post-FTX with short-term expiries trading at a significant premium to longer dated optionality before quickly normalizing in the following weeks.

Bear put spreads in BTC ended up being a popular trade in the middle of the month but, if held until now, have certainly lost some edge as volatility declined and the initial downside directional bias started to fizzle. In ETH, bear call spreads are a recently popular trade with a large amount of the spread traded on November 23rd with the December 30th, 2022, 3K call bought and similar tenor 2.6K call sold.

Last Months Volume

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• 💎 $9.7B Notional was transacted in November
• 💎 27% of Deribit total BTC volumes and 29% of ETH
• 💎 We reached a new all-time high of 62k BTC traded in a single day!

The Fed, Fly’s and Security

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The Big Picture E02

In our newest instalment of The Big Picture, David talks about the “Fed Pause” and what this could mean for markets going forward. Will the pause in rate hikes lead to a cut, and subsequent rally? Or are we all headed to 0? Watch David’s analysis to find out. Watch the full video

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Fly, Fly Away: A Comprehensive Overview of the Butterfly Option Strategy

Our most viewed article last month was a deep dive into one of the most popular Options trading strategies, otherwise known as a Butterfly. Here is the full article in case you want to round out, or brush up on your Option knowledge.

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Security is our Priority

At Paradigm, we heavily prioritize security which means the code we write needs to be held to the highest standard. In case you missed it this month, read more about our bug bounty partnership with HackerOne. If you’re a hacker, you can submit any vulnerability you find in our product to our Bug Bounty page here or contact us at security@paradigm.co

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Making Option Markets

For those interested in understanding more about the life and pitfalls of being an options market maker, check out our podcast The Shift! To start the month of November off, we interviewed Clement Florentin, CEO of Darley Technologies, a liquidity provider for options in the cryptocurrency space.Check out the full podcast, where we cover how DeFi is helping democratize options, how innovation navigates its way around regulatory hurdles, and much more.

The Mob Has Spoken

Tweet of the month goes to us for our thread on trading volatility around a catalyst, which turned out to be quite prescient.

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 💜