Key metrics: (12Aug 4pm HK -> 19Aug 4pm HK):
· BTC/USD +0.2% ($58,500 -> $58,600) , ETH/USD +2.75% ($2,550 -> $2,620)
· BTC/USD Dec (year-end) ATM vol +0.7% (61.5-> 62.2), Dec 25d RR vol +0.5% (3.6 -> 4.1)
· Global risk markets generally been trading well however BTC has remained extremely rangebound. Despite this tight range we have seen HF volatility remaining elevated as the market has struggled to stabilize at equilibrium as it has criss-crossed the pivotal space of 58.5k-59.5k.
· BTC is expected to trade within the wider range of 54–64k for the time being.
· Market appears to be trading in a tightening wedge/triangle which suggests we could witness an inflection point by the end of this week, however without a move outside the range it is hard to expect realised volatility to materially pick up.
Market Themes:
· Tradfi markets roared back last week and yet interestingly the Crypto complex was left lagging behind — oddly resembling more the moves in USD yields (which bounced from the lows but didn’t do much from there).
· Powell will be in focus end of this week with Jackson Hole coming up. Markets expecting at least one cut (and slim chance of a 50bp cut).
· Geopolitics have been quieter in the last week and markets are beginning to feel more summer like ahead of the Labour Day holiday in the US.
ATM implied vols:
· Front-end over the week continued to drift lower despite the high HF realised vol. This was largely explained by the compressing ranges (i.e. terminal distributions). However Vega found good buyers during the beginning part of the week which drove the curves steeper.
· The Election weight began to find more demand with the market seeing what looks to be Election related put spread buying. Election weight overall appears quite fairly priced here.
· If the Spot ranges holds here then one should expect to see the August tenors compressing further possibly steepening against September dates.
· Skew/Convexity:
· Very sideways week for convexity and skew; front end edged up a little in flies as the ATM vol came off.
· Spot-Vol correlation very locally continues to feel negative, but less so than we had last week. Below 55–56k expect gamma to find demand and back at 61–62k expect vols to remain soft.
Good luck for the week ahead!
