Key indicators: (December 9, 4pm -> December 16, 4pm Hong Kong time)
BTC rose 5.3% against USD (99,600 kUSD -> 104,880 kUSD), ETH rose 1.5% against USD (3,910 kUSD -> 3,970 kUSD)
BTC to USD ATM volatility remained unchanged in December (55.2->55.2), and the skewness of December 25 days decreased by 2.5 points (4.2->1.7)
Key technical indicators of spot
The price trend has changed from a unilateral correction to a restrained upward trend. We see that the highest price is constantly refreshed in a very balanced way, suggesting that the current round of progress will reach its peak in the next few weeks, with a target price in the range of 110-115 thousand US dollars, instead of our original target of 115-120 thousand US dollars.
If the coin price drops below $100k again before this, it could lead to a price retreat to the $90-95k range, which would imply that the current upswing is just a longer correction, with the final rise expected next year. On the other hand, if the coin price quickly breaks through $106.5k, it could trigger a more turbulent explosive rise.
Market Themes
In the absence of any obvious short-term catalysts to reverse the upward trend, risk assets continue to grow slightly before the end of the year. The U.S. Consumer Price Index is in line with expectations. Although the core numbers still exceed the Fed's final target, the market's expectation for a 100% rate cut of 25 basis points this week has not changed.
The macro backdrop supporting cryptocurrencies has greatly benefited Bitcoin. As soon as Bitcoin's price dropped below $100k, it was bought up, and it set a new high again this week. The news of Nasdaq including MSTR in its index propelled the coin price up over the weekend, and Taylor himself hinted that more buyers are about to enter the market, stimulating the coin price to finally break through the key resistance level of $104k. The funding rates for Bitcoin and other altcoins returned to normal this week, indicating that such positions are beginning to liquidate after a good year.
ATM Implied Volatility
Despite the relative fluctuations in BTCUSD spot prices this week, which ultimately set a new high, the actual volatility did not increase significantly. It feels like there are relatively few positions being opened in the market as the year ends, which can also be seen from the return to normal funding rates and basis. This has created selling pressure on contracts expiring before the end of the year, where the implied volatility for the December 27 expiration briefly dropped by 50 points this weekend. However, contracts expiring from January next year still maintain strong buying interest. The market has seen significant demand for the upper range (130k-150k) for February/March, along with demand for the lower range (70k-75k) for February/March. The former is likely a transfer of spot longs to Q1 options, while the latter is to hedge core Bitcoin longs.
We expect implied volatility to return to lower levels in January. Currently, the market is pricing in an average implied volatility of over 60 points per week for Q1, a level that will be difficult to maintain based on historical data. During this time, the market retains some risk premium on implied volatility to guard against potential impacts from liquidity shortages around the New Year.
BTC Skew/Kurtosis
Although the implied volatility level rises with the spot price, the skew has shown a downward trend this week. This is mainly due to the demand for lower strike prices expiring in February and March (likely hedged flows), while the classic call spread has left market makers with Vega longs reserved in the $105-110k range.
With the correlation between coin price and skew breaking at the current price level, the kurtosis has also been generally adjusted downward. The market is pricing volatility more in the $90-120k range, and it seems that the coin price will remain within this range over the next month.
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