Volatile Round Trip In BTC

BTC Gives Back Weekly Gains

BTC broke through the $62k resistance, reaching $65k before encountering new supply barriers, ultimately leading the asset to give back all of last week’s gains. The initial surge followed Powell’s Jackson Hole speech hinting at a potential 50bp rate cut in September, signaling a shift towards US monetary easing. Political support is also aligning, with RFK Jr. backing Trump, a pro-crypto stance.

Technically, given that $62k didn’t hold as support, we are unlikely to see leveraged long positions, suggesting the choppiness is set to continue. ETH remains rather bearish without new catalysts on the horizon. The main focus now moves on to the Trump-Harris debate on 10Sep. With favorable US macro conditions, and a potential pro-crypto political shift, BTC is poised for a bullish Q4. Historically, Q4 has been strong, presenting a prime opportunity for accumulating longs.

Crypto Vol Keeps Shifting Down

Crypto’s realized volatility dropped by 10 points to the mid-40s, pulling front-end implied vols lower, while long-term vol holds steadier as the curve steepens into contango. BTC was showing a slightly negative carry, but ETH remained positive. The latest drop in spot has seen front-end implied vols pop back into the 50s as 62k support was unable to hold.

The US election bucket (08Nov) is increasingly pronounced, suggesting a potential 10-15% move depending on various scenarios. Watch for the 10Sep election debate, as it may introduce valuable volatility opportunities once listed.

ETH/BTC: BTC Dominance Hits Local High

ETC/BTC spot trends lower with ETH lacking a compelling narrative against BTC. BTC dominance is rising. The ETH/BTC vol spread has narrowed by a few points to around 8 across the curve, except for a premium on 27Sep. Skew dynamics showed call skew fading at the longer end for both assets, while front skew has flipped back into deep put skew on the 5% drop in spot prices. ETH holds the higher put skew at near 10 vols versus BTC at around 5.

Option Flows

BTC trading volume was up 14% to $8Bn as traders returned and Powell hinted at a September rate cut. Call spreads were the dominant bullish strategy for Sep, Oct and Dec expiries, with some short- dated calls bought for a break above $62k, later rolled higher. Calls account for 64% of weekly volume. ETH volumes remain flat at $2.3Bn, with more balanced flows and a slight edge to puts. Large Dec 2600/3600 call spreads are active, with short-dated vol for sale in August and September at 2800 strikes. September sees downside puts bought in the 2500-2200 range through calendar trades.

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