How Does a “Flight to Quality” Impact Altcoin Derivative Markets?
It causes a sharp increase in selling pressure for altcoin perpetual futures and a drop in open interest. The basis (spot price minus futures price) often flips negative, indicating contango turning into backwardation.
This also leads to a spike in the implied volatility of out-of-the-money put options, as traders hedge against further downside.
Glossar
Altcoin Perpetual Futures
Instrument ⎊ Altcoin Perpetual Futures represent a derivative contract allowing traders to speculate on the future price of an altcoin without a fixed expiration date, mirroring a spot market position with the added capacity for leverage.
Altcoin Put Options
Option ⎊ Altcoin Put Options grant the holder the right, but not the obligation, to sell a specified quantity of an underlying altcoin at a predetermined strike price on or before the expiration date.
Altcoin
Definition ⎊ An altcoin refers to any cryptocurrency other than Bitcoin, encompassing a broad category of digital assets with varied functionalities and market capitalizations.
Altcoin Liquidity
Depth ⎊ Altcoin liquidity quantifies the ease with which non-Bitcoin cryptocurrencies can be bought or sold without significantly impacting their market price.