Key Indicators: (December 2nd, 4 PM -> December 9th, 4 PM Hong Kong Time)
BTC against USD is up 3.9% ($95,900 -> $99,600), ETH against USD is up 7.4% ($3,640 -> $3,910)
BTC against USD December (year-end) ATM volatility fell by 0.6 points (55.8 -> 55.2), 25 d skew fell by 0.7 points (4.9 -> 4.2)
Looking at the trends, the spot market is still correcting the price. Although the crypto price hit a new high above $100k, it quickly and heavily fell back afterward. We believe any rise will be sold off, while large market demand will emerge during a drop, thus we expect to see a one-sided corrective trend (price movements gradually flattening). Currently, resistance is mainly at $99k-$104k, and support starts from $94k down to $85k.
Although the price will initially fluctuate within this range, we expect actual volatility to eventually weaken (provided the price does not break out). If the price breaks down, we will be brought back to $76k. Any substantial upward breakout will lead the price to reach the ultimate range of $115k-$120k ahead of schedule (which we initially expected to occur between January and February next year).
Market Theme:
Bitcoin finally broke through the psychological barrier of $100k last Thursday, causing the price to test $104k twice, with good support both times. Initially, it seemed that this level was the answer the recent bull market trend was eagerly hoping for, but in the next 24 hours, momentum quickly weakened, and we fell back below $100k. This triggered the liquidation of fresh long positions above $100k, leading to a price drop, with a low of $90k. However, this did not last long, as the market regained $100k during the New York trading session and stabilized relatively within the range of $96k-$100k.
Due to the overall bullish market sentiment, other cryptocurrencies continue to rise. The price of ETH against USD has also pushed above the psychological barrier of $4k, but it is still 20% away from its historical high.
The price volatility in traditional financial markets has calmed somewhat. The implementation of martial law in South Korea triggered brief concerns (which led Bitcoin to briefly drop to $93k), but it was soon confirmed to merely be a local political turmoil that quickly settled. China has reiterated its commitment to provide stimulus policies next year in response to the generally weak market since Trump's election and the promise of a new round of tariffs. Lastly, U.S. labor data continues to show signs of gradual weakening. Last week's non-farm payroll report did not impact the Federal Reserve's gradual interest rate cuts. Therefore, overall, we continue to believe that the macro backdrop supports risk assets.
BTC ATM Implied Volatility:
Overall, the market volatility last week was very large. Initially dropping to $93k due to South Korea's martial law, it then broke $100k and approached $104k, before dropping back to a low of $90k due to liquidation. Despite such volatility, the high-frequency actual volatility was around 60 points, representing only the market's pricing of the average weekly implied volatility for the first quarter of next year!
Therefore, most of the surge in implied volatility has faded, especially for expiration dates before year-end. Unless the price range of $90–$104k is completely broken, it will be difficult for actual volatility to maintain at that level. However, in the far end of the term structure, the market has seen significant buying flow, especially above the March and June expirations (strike prices of $150–$200k), leading to elevated premiums after the January expiration date. Again, it is emphasized that considering last week's high actual volatility maintained a weekly implied volatility of 60 points, the market will find it challenging to sustain such high implied volatility before a significant breakout in spot prices occurs.
BTC Skew/Kurtosis
Despite some quite intense pullbacks in the spot market, skew prices have remained relatively stable this week. Ultimately, market demand is still mainly concentrated above the price level, with hedging in the short term being one of the few demands below the crypto price.
Accompanied by the rise in actual volatility, kurtosis has generally increased this week, also due to the market's demand for purchases on a single wing (especially the upper wing).
Wishing everyone good luck in the coming week!
