Key indicators (November 11, 4 PM - November 18, 4 PM 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 end-of-year (December) ATM implied 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
The market began to accelerate upwards in the past week, and any signals that initially seemed overbought were ultimately replaced by strong momentum. The market should have accumulated a large amount of Gamma around the 90k level, as it faced repeated resistance at this point before attempting to break upwards, ultimately reaching the 93.25k USD position. Currently, 91.75k-93.5k USD will be our top resistance level.
Referring to the above chart, the first support level is slightly below the current price level at diagonal support, which will continue to exert pressure guiding the market to test price highs. If the price completely breaks below this support level, we expect to find good support around 85k-86.25k USD. However, further down we anticipate a wave of severe position liquidations.
The daily and hourly volatility ranges have begun to show signs of contraction. If the price cannot break above 93.5k USD, we expect to see a reduction 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 USD. However, during this period, we expect the market to gradually stabilize and take a slight breather over the next 6 months. If in the next week or two we see stronger evidence supporting the contraction of the volatility range (at least in the short term), this view will be validated and begin to exert pressure on Gamma positions.
Market Themes
This week, the 'Trump trade' continues to go full throttle. The US dollar continues to rise against other fiat currencies, while US Treasury yields are also climbing. Cryptocurrency has once again shown performance that is completely unrelated to the dollar. Bitcoin has surged above 90k USD, while other altcoins have also shown astonishing gains. The US stock market experienced a good week and saw a sharp drop in the VIX index, before taking a slight breather over the weekend. But this is merely a small correction in this bull market trend.
Everyone's focus is now on Trump's cabinet choices, with attention on the impending announcement of the Treasury Secretary appointment regarding cryptocurrency. Scott Bensett initially appeared to be the most promising candidate, but Elon Musk indicated support for Howard Lutnick over the weekend. Both can be said to be candidates who support cryptocurrency, although Lutnick more so. However, it seems that the final choice is still far from being finalized, as Kevin Walsh and Mark Rowan have also been included in the candidate list in the past 24 hours.
It seems that MSTR has announced the purchase of over 27,000 bitcoins before and after the election, and there is still ongoing buying demand. The company's stock price remains at its peak, and its net asset premium is 2.5 times the spot price of Bitcoin. The price of BTC against USD has received good support during each pullback. Even with ETF fund outflows from ARKB and BITB on Thursday and Friday, the price still managed to rebound above 90k USD over the weekend.
ATM Implied Volatility
After a strong breakout of the price above the resistance level of 80k-82k USD last Monday night, it soared upwards, while the implied volatility levels surged sharply. As the market reached 93k USD, high-frequency actual volatility was pushed up to the 60s, and then the price returned to the range of 87k-93k USD with considerable oscillation levels.
The price volatility arrived earlier than the market expected, while the rapidly rising actual volatility led to a quick inversion of the volatility term structure. The ATM implied volatility on November 29 rose from the low of 47-48 ten 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 situation. If Trump successfully pushes for regulation of cryptocurrencies, a large wave of capital will flow in and ultimately support the price, further weakening volatility. Moreover, the current price level has largely factored in this aspect. Although the price is still fluctuating significantly, actual volatility has not exceeded the 60s level, while the daily expiration implied volatility continues to hover between the low 50s and high 60s (the average for this year is 45-50). However, at present, bullish momentum has stimulated demand in the price range of 100k-150k from the end of the year 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 because the market is eagerly anticipating further upward breakthroughs in cryptocurrency prices. Implied volatility continues to show a positive correlation with the price. When the price drops to the 87-88k range, implied volatility is depressed across the curve, but whenever the price attempts to break upwards again in the 91.5k-93.5k USD range, sellers quickly retreat. In addition, the closing of in-the-money call spreads and rollovers has also driven up the skew.
With the rapid increase in actual volatility, kurtosis has also significantly increased. This week, an increase in demand for the upside wings was observed, especially above 100k USD. Simultaneously, some demand for downside wings in the shorter term was seen, primarily used to protect spot or margin positions.
Wishing everyone good luck in the coming week!
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