Key Indicators (November 11 4 PM - November 18 4 PM Hong Kong Time)
BTC/USD price increased by 13.0% ($81.2k-$91.75k), ETH/USD price decreased by 0.3% ($3.14k-$3.13k)
BTC/USD Year-end (December) ATM volatility increased by 5.2 points (51.8 -> 57.0), December 25d skew increased by 2.7 points (3.2 -> 5.9)
Overview of Spot Technical Indicators
Over the past week, the market began to accelerate upward, and any signals that initially appeared overbought were ultimately replaced by strong momentum. The market should have accumulated a large amount of Gamma around $90k, as the market initially faced resistance at this point multiple times, then attempted to break upwards, ultimately reaching $93.25k. Currently, $91.75k-$93.5k will be our top resistance level.
Referring to the above chart, the first support level is slightly below the current price level's diagonal support, which will continue to exert pressure to guide the market to test price highs. If the price fully breaks down below this support level, we would find good support around $85k-$86.25k again. However, further down we expect to see a wave of fierce position liquidations.
The daily and hourly volatility ranges have begun to show signs of contraction. If the coin price fails to break through $93.5k, we expect to see a decline in actual volatility. We maintain a long-term bullish view and reasonably predict that the target for the first quarter of next year is $105k-$115k. However, during this period, we expect the market to gradually stabilize and take a slight breather over the next six months. If we see stronger evidence supporting the contraction of the volatility range (at least short-term) in the next week or two, this view will be confirmed and start to exert pressure on Gamma positions.
Market Themes
This week, the 'Trump trade' continues to be in full swing. The US dollar continues to rise against other fiat currencies, while US Treasury yields also continue to climb. Cryptocurrencies once again show a performance completely unrelated to the US dollar. Bitcoin surged above $90k, while other altcoins also exhibited astonishing growth. The US stock market had a good week and saw a sharp drop in the VIX index, followed by a slight adjustment over the weekend. But this is just a minor correction in the midst of this bullish trend.
Everyone's focus is now on Trump's cabinet selections, with the cryptocurrency spotlight on the upcoming announcement of the Treasury Secretary appointment. Scott Bessen initially appeared to be the most promising candidate, but Elon Musk expressed support for Howard Lutnick over the weekend. Both can be considered pro-cryptocurrency candidates, although Lutnick more so. However, it seems that the final candidate is still far from being finalized. In the past 24 hours, Kevin Warsh and Mark Cohen have also been added to the candidate list.
It seems that there is still a sustained demand for purchases after MSTR announced it bought more than 27,000 bitcoins before and after the election. The company's stock price is still trading at peak levels, with a net asset premium of 2.5 times the spot price of bitcoin. The BTC price against USD has received good support during each pullback. Even with outflows from ARKB and BITB ETFs on Thursday and Friday, the coin price still managed to rise back above $90k over the weekend.
ATM Implied Volatility
Last Monday night, after the coin price strongly broke through the resistance level of $80k-$82k, it surged upward, while implied volatility levels sharply rose across the board. As the market touched the $93k level, the high-frequency actual volatility was pushed to over 60, and then the coin price returned to the range of $87k-$93k with considerable volatility.
The volatility of the coin price arrived earlier than the market expected, while rapidly rising actual volatility led to a quick inversion of the volatility term structure. The ATM implied volatility on November 29 rose from a low of 47-48 ten days ago to a high of 65. The volatility levels further along the curve were also dragged higher in a time-weighted manner.
There is a structural argument that suggests volatility will gradually weaken under the new situation. If Trump successfully pushes for regulation of cryptocurrencies, a large wave of funds will flow in and eventually provide support for coin prices, further weakening volatility. Moreover, the current coin price level has already largely considered these factors. Although the coin price is still fluctuating significantly, actual volatility has not exceeded the 60 level, while the implied volatility expiring that day continues to fluctuate within a minimum of the low 50s to a maximum of the high 60s (the average level this year is 45-50). But for now, bullish momentum has sparked demand for the price range of $100k-$150k from year-end to the end of January next year, while providing support for implied volatility.
Skew/Kurtosis
This week, the skew continues to rise (mainly on the bullish side), primarily due to the market's anticipation of further upward breakthroughs in coin prices. Implied volatility continues to show a positive correlation with coin prices. When the coin price drops to the $87k-$88k range, implied volatility is suppressed across the curve, but whenever the coin price attempts to break upward in the $91.5k-$93.5k range, sellers quickly withdraw. Additionally, the unwinding of in-the-money call spreads and rollovers also drive up the skew.
As actual volatility rises sharply, the kurtosis also significantly increases. This week saw an increase in demand for the upside wings, especially above $100k. The market also observed some demand for downside wings in the short term, mainly used to protect spot or margin positions.
Wishing everyone good luck in the coming week!
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