Key metrics: (16Sep 4pm HK -> 23Sep 4pm HK):
BTC/USD +7.8% ($58,900 -> $63,500) , ETH/USD +14.5% ($2,305 -> $2,640)
BTC/USD Dec (year-end) ATM vol -0.1v (59.5-> 59.4), Dec 25d RR vol +0.8v (2.4 -> 3.2)
Spot Technical Outlook
The short-term trading channel we discussed last week saw its support initially tested, after which spot was able to regain its footing and trended cleanly higher post FOMC, up to the range resistance level of $64–65k. Market has been flirting with this level for the last couple of sessions but price action above 64k so far has left us wanting
From a technical perspective our base case for now is that we should expect the range to hold and spot to consolidate between $61.5 -64k. If we do break the level then we can expect spot to initially aim to test the highs around $70k
Note that a break of the range resistance will also coincide with a breaking of the long-term flag top (see bonus chart below) and this could catalyse a much larger move:
Market Themes:
FOMC delivered a punch as they opted for a 50bp cut to start their cutting cycle, igniting animal spirits in equities and crypto (altcoins in particular), while Gold and Silver also traded higher. Interesting the USD actually didn’t weaken further against G10 currencies indicative of over-stretched positioning there
US presidential polls continue to edge marginally further in favour of Harris, but since the short term narrative focus switched to the FOMC rate cuts, this hasn’t weighed on crypto prices
ATM implied vols:
ATM Implied Volatility for BTC$ (16–23Sep 4pm HK)
Realised volatility remained pretty subdued throughout excluding the FOMC event, as the market awaited a fresh catalyst. Realised numbers were in the mid 40s on a high frequency and fix-to-fix basis, while the 4.5% move in the morning following Fed slightly outperformed the break-even the market priced for the event (which squeezed from 2.5 to 3.6% into the event)
Further unwinds of downside hedges and lack of directionality pre FOMC put downward pressure on vols, though for the most part implied vols remained supported at these levels since we are at the range lows and the election is approaching
The front-dated contracts were heavily offered to start the week before squeezing into Fed; they then were heavily offered again into the weekend without a break of the key $64–65k resistance level. There was a brief spike on 23Sep as spot tested the top end of the range but that was short-lived and gamma contracts were offered heavily following
Election variance has priced fractionally lower once more as the market took out risk premium from the front-end of the curves; with odds still close to 50/50 we expect to see this squeeze higher as we approach the event
Skew/Convexity:
Skew prices moved in favour of topside this week as the market looks for a break of the $64–65k range resistance to catalyse some fresh impetus in prices. Short term this makes sense but structurally until we clear the election it’s not clear we have enough of a catalyst from Fed alone to see a fresh ATH in spot prices and a new regime of vol
Flies were actually offered this week as the market saw unwinds of downside hedges (supplied the market with flies/paid the market for RR), while topside demand post FOMC was mainly in the form of call spreads again, supply further flies to the market
Good luck for the week ahead!
