Amid recent bearish sentiment, Bitcoin has struggled since last night’s US trading session, falling by 2.5% around ten o’clock. This decline continued into the Asian trading session, where a liquidation event drove the price down to $55,606 before it slightly recovered and fluctuated around $56,000. Throughout the day, implied volatility showed a negative correlation with the price. After significant intraday fluctuations, the term structure for BTC and ETH experienced Bull Flattening, with ETH showing a more pronounced lift at the longer end. Short-term volatility levels even displayed a significant inversion pattern, highlighted by an intraday high of 85% RV.

Source： SignalPlus

The implied volatility (IV) of front-end ETH is not only higher than that of BTC but is also currently at historical highs, exceeding the 75th percentile. The elevated Volatility Premium Ratio (VPR), as reflected in the implied hedging costs from the Realized Volatility (RV) volatility cone, may attract bearish volatility strategies. This could potentially dampen the upward tilt of the term structure in the short term.

Source： SignalPlus

Source： SignalPlus

Source: Deribit (as of 4 SEP 16:00 UTC+8)

Due to the further price decline and the breaking of recent lows, the front-end Skew has erased all of yesterday’s gains and returned to lower levels. Volatility Premiums at longer maturities have also risen, with the most significant increase observed in BTC with 8 NOV expiration due to the U.S. elections. This has led to higher premiums for the subsequent two expiry dates as well. The convexity of ETH for the end of the year (December 27) remains at a local high, climbing to 3.53%.

Source: SignalPlus, Vol Skew

Source: SignalPlus, Fly

In terms of trading activity, the directional bias in BTC trades is relatively balanced. The recent price decline has led traders to set up extreme scenario protections for their positions (e.g., a 29 NOV-35000-P 500 BTC Long Put). At the same time, this provides an opportunity for those who remain bullish to establish more cost-effective bullish strategies. For instance, a 27 SEP 63000 vs 65000 Long Call Spread (200 BTC per leg) offers a cheaper entry point for bullish positions.

Source: SignalPlus， Block Trade