SignalPlus Vol Commentary (03 Jun 2024)

Last Friday, the core PCE price index, closely watched by the Federal Reserve, recorded a monthly rate of 0.2%, slightly below the expected 0.3%, marking a new low since December 2023. Following the data release, U.S. Treasury yields fell for four consecutive days, reversing nearly half of the previous week’s gains, with the ten-year yield dropping below 4.5% to 4.475%, and the two-year yield at 4.871%. The risk markets were buoyed, with the Dow Jones and S&P 500 rising 1.51% and 0.8% respectively, while the Nasdaq was nearly flat.

In the realm of digital currencies, according to Glassnode data presented by Leon Waldmann on Twitter, following the approval of an ETH ETF, the proportion of BTC & ETH held in centralized exchanges has dropped to a historic low. Approximately $3 billion worth of Ethereum has left centralized exchanges, increasing the potential for a short squeeze. BTC today broke above the $68,500 resistance level and began challenging the next resistance level at $71,500. As of now, BTC has hovered near $68,500 for nearly 12 days; if a breakthrough is unachievable, it might revisit $66,000 for support.

In terms of options, BTC front-end implied volatility saw a slight rebound before the start of the workweek, but overall, it remains at a relative low, below the 25th percentile of the historical three-month range; ETH is slightly below the historical median, with a relatively steep term structure curve. Observations of the past 24 hours’ trading also show strong selling pressure on bullish options for mid to early June, whereas calls for late June and July are very popular, perhaps also related to the anticipation of ETF S-1 approval. The current market “consensus” is still for “approval by July at the earliest,” at which time capital inflows and a potential price surge are expected. However, on the other hand, given that Grayscale’s Ethereum Trust (ETHE) currently manages assets worth $11 billion, there is also concern that the market might experience similar selling pressure as seen with GBTC following the ETF’s approval and issuance.