Key Indicators: (December 30 4PM -> January 6 4PM Hong Kong Time)
BTC against USD increased by 6.2% (93.5K USD -> 99.3K USD), ETH against USD increased by 7.4% (3.4K USD -> 3.65K USD)
Spot Technical Indicators
At the end of 2024, the price held the support level of 92K USD. At the beginning of the new year, we see the market starting to show buying interest, and the price has risen slightly to test the resistance level of 100K USD. This strongly implies that the market is accumulating long positions in preparation for the next rally. We believe that in the long run, the price will be in the range of 115-120K USD.
We believe that the short-term price top will be at 100K USD or slightly above, and we expect sellers to appear around that level. If there is a lack of further buying, it may trigger a pullback to the 95-96K USD range. However, if the price completely breaks through 100K USD, the next top will appear at 102-103K USD, followed by 104-105K USD and finally reaching the previous high of 108.5K USD. On the downside, the initial support level is at 95-96K USD, and a further decline will reach below 92K USD.
Market Themes
Another turbulent holiday week. The cryptocurrency market has once again dipped within a certain range, with BTC against USD falling below 93K USD; ETH against USD falling below 3.3K USD. However, the arrival of the new year has brought upward momentum to the market. The market seems to be adjusting its positions ahead of Trump's inauguration this month.
In other assets, the "Trump trade" has also regained momentum. The US dollar is dominant in trading against the G10/Asia, while the S&P 500 index (SPX) has started to rebound after an initial decline at the beginning of the year.
On the macro front, data this week has been relatively scarce, until the release of the non-farm payroll data on Friday. The market is particularly eager for this data, especially after the relatively hawkish stance of the Fed in December caught the market off guard. If there are any downside surprises, the market may quickly reprice in preparation for faster rate cuts.
BTC Implied Volatility
Although the price has seen significant local volatility, overall realized volatility has been declining, further leading to a continuous decline in implied volatility, especially for the January expiry. The implied volatility for the January expiry is now lower than the same period last week, despite the upcoming Trump inauguration and ETF rebalancing flows at the start of the new year.
In the curve's far end, implied volatility still shows strong buying pressure. This is because the market is still digesting the large demand that appeared in December, especially in the February and March expiries. Considering the decline in the January expiry, we expect to see the far-end implied volatility also gradually return to normal.
BTC Skew/Kurtosis
With the market's liquidity fully recovered and the relatively low realized volatility as the market returns from the year-end price low, the skew has shown a downward trend this week. If the market continues to gradually rise before the inauguration, we expect realized volatility to underperform, as the market distribution on the upside is relatively even. However, if we see the price fall sharply again, market players may actively participate in bets on the upside of the price.
For the same reasons as above, kurtosis has remained relatively low. The market's demand for tail risk is starting to decrease, as the spot market has moved away from the potentially high-slippage area around 90K USD. At the same time, the demand for single-sided buying at the top has also gradually decreased, or has been converted into long volatility trades, exerting selling pressure on kurtosis. The low correlation between spot and skew has also weighed on kurtosis pricing.
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