Key Indicators: (November 18 4PM - November 25 4PM Hong Kong Time)
BTC against USD up 7.0% ($ 91,750-$ 98,200), ETH against USD up 8.6% ($ 3,140-$ 3,410)
BTC against USD year-end (December) ATM volatility up 3.0 points (57.0->60.0), year-end 25 d skew down -1.0 point (5.9->4.9)
The upward price trend is still continuing, but the actual volatility is slowing down and the momentum is gradually stagnating. These signs suggest that the short-term peak may be appearing (but whether we have already reached the peak or continue to break through the $100,000 price, it remains to be observed).
We believe that the liquidation will not lead to a significant drop in the currency price, because the price has very good support between $85k-$93k, and the chaos and frenzy caused by MSTR will temporarily provide enough buy orders for the market. The price movement of the market is well in line with the Elliott wave theory we have been tracking.
If the currency price breaks through $100-$104k, it will further open up the space for the third wave of the upward trend (as shown in the figure), and it means that the upward trend will continue to $130-$150k, rather than the $115-$120k that we currently believe.
Market Themes
In the past week, the "Trump trade" is still ongoing. The US dollar has risen against other currencies, and US Treasury yields have also continued to rise. Cryptocurrencies have once again decoupled from the US dollar. Bitcoin tested a high of $99.8k, but lost its momentum before the critical psychological level of $100k. Other altcoins have also seen amazing rallies, and ETH has finally awakened from its slumber.
Scott Baesent has been confirmed as Trump's Treasury Secretary, eliminating the potential bullish factor of Howard Lutnik's possible election.
Last week, MSTR announced the purchase of 55,000 bitcoins (at an average price of $97,862, with a total value of $5.4 billion), fully utilizing the funds they raised from stock sales and convertible bond issuance. As the price approached the high, the impact of ETF holders rebalancing their positions exceeded MSTR's continued purchases, so the overall supply and demand in the $97-$100k price range was relatively balanced.
ATM Implied Volatility
Although the price briefly broke through $100,000 this week, considering all factors, the stable short-term implied volatility is very reasonable, as the actual volatility has not increased substantially due to the active currency price. The increased demand for upside opportunities in the longer term has led to a rise in the implied volatility of March/June.
If the spot price fails to break through $90-$100k, we expect the market to take profits on short-term positions around the year-end, leading to increased pressure on the short-term curve, especially with Thanksgiving and Christmas approaching. Naturally, this will lead to a steepening of the term structure.
Skew/Kurtosis
The skew remained relatively stable this week. As the currency price failed to break through the $100,000 mark, market concerns about a downward correction in the currency price are growing. In addition, the implied/actual volatility failed to rise at the price high, especially in the short term, which suppressed the correlation between price and volatility, and further suppressed the skew. In the more distant parts of the curve, the correlation between price and volatility is more evident (the implied volatility of March/June/September is higher at the price high), so the skew has better support at the far end of the curve.
Accompanied by the significant increase in actual volatility fluctuations this week, the kurtosis has also risen sharply. We have observed demand in the market for out-of-the-money options, especially on the upside around $100k. At the same time, there is also demand in the market for short-term downside strike prices, mainly to protect spot and margin positions.
Wishing you all a great week ahead!
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