Key metrics: (18Nov 4pm HK -> 25Nov 4pm HK):
BTC/USD +7.0% ($91,750 -> $98,200) , ETH/USD +8.6% ($3,140 -> $3,410)
BTC/USD Dec (year-end) ATM vol +3.0v (57.0->60.0), Dec 25d RR vol -1.0v (5.9 -> 4.9)
Spot Technical Outlook:
The upward trend continues to play out, but we are beginning to see some factors that are suggestive of the local top coming in here (whether we have already had it or we want to print >$100k is still to be seen!) as the realised vols are easing and momentum appears to be stalling
We don’t believe a washout will be particularly deep however with some decent support coming between $93–85k below. The mayhem and mania associated with MSTR will leave the market with deep bids for now and this fits in nicely with the Elliott Wave Progression we have been following.
Breaches through $100–104k would open up for further extensions in this wave 3 move and could imply our total expansion is heading to a target of $135–150k rather than $115–120k which is our current base case
Market Themes:
‘Trump trades’ continued for yet another week with the USD pushing higher against FIAT currencies and US yields continuing to push higher. Crypto once again de-correlated from the USD with Bitcoin testing up to a high of $99.8k, faltering at the key psychological level of $100k, while Altcoins also continued with some impressive rallies, with ETH finally waking up from its slumber
Scott Bessent was confirmed as Trump’s Treasury Secretary, taking away one potentially bullish tail in the form of Lutnick
MSTR announced a purchase of 55,000 bitcoins last week ($5.4bn at an average of $97,862), fully utilising the capital they raised from share sales and convertible issues. The rebalancing effect from ETF holders clearly has outweighed this constant buying from MSTR up near the highs, therefore the overall supply-demand picture remained quite balanced up in the $97–100k range
ATM implied vols:
Despite spot pushing up against $100k this week, implied vols in the front-end were fairly stable all things considered, as realised volatility didn’t materially pick up despite all the activity. There was more demand further out the curve with March/June vols pushing higher as longer-term topside optionality remained in demand
Should spot struggle to break out of this $90–100k range we would expect pressure to mount on the front-end of the curve as the market looks to take profit on short-term positions into year-end, particularly with Thanksgiving and eventually Christmas approaching. This should lead to some natural steepening of the term structure
Skew/Convexity:
Skew prices remained relatively muted this week as the market became increasingly nervous about a correction lower in spot, with $100k failing to break. Moreover implied/realised volatility struggled to pick up on higher spot particularly in the front-end of the curve which dampened spot-vol correlation and weighed on skew. Further out the curve the spot-implied vol correlation was more pronounced (higher March/June/Sep implied vol on higher spot) which helped skews further out the curve to remain better supported
Convexity priced higher as realised vol-of-vol picked up aggressively this week, while demand for wing strikes particularly on the topside >$100k were observed. The market also seems to have been paid for some wing low-strikes for cash protection/margin protection in shorter dates as well
Good luck for the week ahead!
