Key Indicators (4 PM November 11 - 4 PM November 18, Hong Kong Time)
BTC/USD price increased by 13.0% (81.2k-91.75k USD), ETH/USD price decreased by 0.3% (3.14k-3.13k USD)
BTC/USD year-end (December) ATM volatility increased by 5.2 points (51.8->57.0), December 25d skewness increased by 2.7 points (3.2->5.9)
Spot Technical Indicators Overview
The market started to accelerate its upward trend in the past week, and any initially overbought signals were eventually replaced by strong momentum. The market should have accumulated a large amount of Gamma around 90k, as the market was initially obstructed at this level multiple times, then tried to break through upwards, and finally reached 93.25k USD. Currently, 91.75k-93.5k USD will be our top resistance level.
Referring to the chart above, the first support level is the diagonal support slightly below the current price level, which will continue to exert pressure and guide the market to test the price highs. If the price completely breaks through this support level, we will find good support again around 85k-86.25k USD. But further down, we expect to see a violent wave of position liquidation.
The volatility range of the daily and hourly charts has begun to show signs of contraction. If the price fails to break through 93.5k USD, we expect to see a reduction in actual volatility. We maintain a long-term bullish view and reasonably forecast a target of 105k-115k USD for the first quarter of next year. However, during this period, we expect the market to gradually stabilize and take a breather over the next 6 months. If we see stronger evidence supporting the contraction of the volatility range (at least in the short term) in the next one or two weeks, this view will be confirmed and start to put pressure on the Gammashi positions.
Market Themes
This week, the "Trump trade" continued in full force. The US dollar continued to rise against other fiat currencies, while US bond yields also continued to rise. Cryptocurrencies have once again shown performance unrelated to the US dollar. Bit rose above $90,000, while other altcoins also saw impressive rallies. The US stock market had a good week and saw a sharp drop in the VIX index, which then took a breather over the weekend. But this was just a minor correction in the ongoing bull market trend.
The focus is now on Trump's cabinet picks, with the crypto community's attention on the upcoming Treasury Secretary appointment. Scott Baesler initially looked like the most promising candidate, but Elon Musk expressed support for Howard Lutnik over the weekend. Both can be said to be pro-crypto, although Lutnik more so. However, it seems the final decision is still far away, as Kevin Walsh and Mark Rowan have also been added to the candidate list in the past 24 hours.
It appears that there is still ongoing demand for Bit after MSTR announced purchasing over 27,000 Bit before and after the election. This is because the company's stock price is still trading at its all-time high, with a net asset premium of 2.5 times the spot price of Bit. The BTC/USD price has received good support during each pullback. Even with outflows from ARKB and BITB ETFs on Thursday and Friday, the weekend price rebounded back above $90,000.
ATM Implied Volatility
After the strong breakthrough of the 80k-82k USD resistance level in the late Monday, the price continued to surge upwards, and the implied volatility level across the board rose sharply. Accompanied by the market reaching the 93k USD level, the high-frequency actual volatility was pushed to nearly 60, and then the price returned to the 87k-93k USD range with quite violent fluctuations.
The volatility of the price arrived earlier than the market expected, and the rapid rise in actual volatility caused the volatility term structure to invert quickly. The 29 Nov ATM implied volatility rose from the 47-48 low 10 days ago to a high of 65. The volatility levels further out on the curve were also dragged higher in a time-weighted manner.
There is a structural argument that volatility will gradually weaken under the new regime. If Trump successfully pushes for crypto regulation, a large influx of capital will ultimately provide support for the price, further weakening volatility. Moreover, the current price level already factors in a lot of this. Although the price is still fluctuating greatly, the actual volatility has not exceeded the 60s level, and the daily expiring implied volatility has been ranging from the low 50s to the high 60s (the average for the year is 45-50). But for now, the bullish momentum has fueled demand for the 100k-150k price range by year-end/early next year, providing support for the implied volatility.
Skewness/Kurtosis
The skewness continued to rise this week (mainly on the upside), mainly due to the market's eager anticipation of further upward breakthroughs in the price. The implied volatility continues to show positive correlation with the price. When the price fell to the 87-88k range, the implied volatility was suppressed across the curve, but whenever the price tried to break through the 91.5k-93.5k USD range again, the sellers quickly withdrew. In addition, the unwinding and rolling of in-the-money call options also drove the increase in skewness.
With the rapid rise in actual volatility, kurtosis has also increased significantly. This week, we observed an increase in demand for the upside, especially above 100k USD. The market has also seen some demand for the downside wing in the shorter term, mainly for hedging spot or margin positions.
Wishing you all the best for the coming week!
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