At the end of 2024, the price maintained a support level of $92,000. As the new year began, we saw the market start to show a willingness to buy, and the price slightly increased as it tested the resistance level of $100,000. This strongly suggests that the market is building momentum for the next rise and accumulating long positions during the pullback. We believe that in the long term, the price will range between $115,000 and $120,000.
Key indicators: (December 30, 4 PM - January 6, 4 PM Hong Kong time) BTC to USD increased by 6.2% ($93.5k to $99.3k), ETH to USD increased by 7.4% ($3.4k to $3.65k). The spot technical indicators at the end of 2024 show that the price maintained a support level of $92k. As the new year began, we saw the market start to show a willingness to buy, and the price slightly increased as it tested the resistance level of $100k. This strongly suggests that the market is building momentum for the next rise and accumulating long positions during the pullback. We believe that in the long term, the price will range between $115k and $120k. We believe the short-term price peak will be at $100k or slightly above, and we expect sellers to emerge around that level. If there is a lack of follow-up buying, it may trigger a pullback to the range of $95k to $96k. However, if the price completely breaks through $100k, the next peak will appear at $102k to $103k, followed by $104k to $105k, and eventually reaching the previous high of $108.5k. On the downside, the initial support level is at $95k to $96k, and continuing to decline could reach below $92k.
The market theme is another tumultuous holiday week. The cryptocurrency market has once again dipped within a certain range, with BTC to USD falling below $93k; ETH to USD falling below $3.3k. However, the arrival of the new year has brought upward momentum to the market. It seems the market is adjusting positions in anticipation of Trump's inauguration ceremony this month. Among other assets, the 'Trump trade' has also regained momentum. The dollar is dominant in trading against G10/Asia, while the S&P 500 index (SPX) has begun to recover after the decline that started at the beginning of the year. On the macro front, there is relatively little data this week, until Friday's non-farm payroll data is released. The market is particularly looking forward to this data, especially after the Fed's relatively hawkish stance in December caught the market off guard. If there are any unexpected downturns, the market may quickly reprice in preparation for faster interest rate cuts.
Despite large local fluctuations in price, the overall actual volatility continues to decline, leading to a sustained decrease in implied volatility, especially for January's expiration. The implied volatility for January's expiration is now lower than the same period last week, despite the upcoming Trump inauguration and ETF rebalancing flows at the beginning of the new year. At the far end of the curve, implied volatility still shows resilient buying interest. This is because the market is still digesting the large demand that appeared in December, especially for expirations in February and March. Considering that a downward correction has already occurred for the January expiration, we expect to see the far-end implied volatility gradually return to normal.
With the market's liquidity fully restored, and the market returning from the low price point at the end of the year with lower actual volatility, this week's skew shows a downward trend. If the market continues to rise slowly before the inauguration, we expect actual volatility to perform poorly, as the market distribution on the upside is relatively even. However, if we see the price sharply drop again, market players may actively participate in bets above the price. For the same reasons mentioned above, the kurtosis remains low. Demand for the wingside is beginning to decrease, as the spot market has moved away from the potentially large slippage around $90k. Meanwhile, demand for single buy orders above is also gradually decreasing or has shifted into bullish spreads, exerting selling pressure on kurtosis. The low correlation between spot and skew is also dragging down the price of kurtosis.
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