Key metrics: (30Dec 4pm HK -> 6Jan 4pm HK):
BTC/USD +6.2% ($93,500 -> $99,300) , ETH/USD +7.4% ($3,400 -> $3,650)
Spot Technical Outlook:
The support at $92k continued to hold and we have respected the range for the remainder of 2024. Into January we have started to see the new year buying interest and this has taken us up to test the resistance just below $100k. We think this strongly suggests the market is beginning its next ascent and look to accumulate longs on dips with a long term target of $115–120k+
Locally we think we could find a short term top at or just above $100k and expect to find sellers in this zone. A lack of follow through would potentially trigger a move back to $95–96k; however should we continue to break cleanly higher the next lvls on the top side include $102–103k, then $104–105k and finally the previous highs at $108.5k. On the downside initial support comes in at $95–96k and below that back at $92k
Market Themes:
Another choppy holiday week as the crypto market once more tested range lows with BTCUSD spot below $93k and ETHUSD below $3,300; however, the turn of the year has brought with it some upward momentum as the market looks to pre-position ahead of the Trump inauguration later this month
Cross-asset the ‘Trump trades’ also regained traction with the USD gaining ground against G10/Asia peers while SPX has begun to climb off the lows after an initial gap lower to open the year
On the macro front, data is fairly light this week until Friday’s NFP number which will eagerly anticipated after December’s rather hawkish Fed caught the market off-guard; any surprise to the downside could see the market quick to price in faster cuts once again
BTC$ ATM implied vols:
Despite some choppy local price action locally, overall realised volatility continues to decline and this has translated into pressure on January expiries in particular, which are lower than this time last week despite the Trump inauguration and expectation of ETF rebalancing flows to start the year
Further out the curves implied vols remain stubbornly bid as the market continues to digest the heavy demand witnessed in December for February-March expiries in particular. We continue to expect an eventual normalisation of those especially with the correction lower in January already witnessed
BTC$ Skew/Convexity:
Skew prices trended lower this week as full liquidity returned to the market and with realised volatility low on the spot move higher from the pre year-end lows. Should the market continue to grind higher into inauguration we would expect to see realised volatility underperform with this side of the distribution more orderly; however if we start to see sharp pullbacks in spot again then market participants may optionalise topside plays
Convexity also remains heavy for the same reason as above — demand for wingy low strike protection has subsided with the spot market pulling away from the potentially slippery zone sub $90k, while outright topside demand has also subsided or rotated into call-spreads which has supplied more flies to the market. The underperformance of the spot vs risk-reversal correlation is also weighing on convexity prices
Happy new year and good luck for the year ahead!
