Key metrics: (26Aug 4pm HK -> 2Sep 4pm HK):
BTC/USD -9.8% ($63,600 -> $57,400) , ETH/USD -12.2% ($2,735 -> $2,400)
BTC/USD Dec (year-end) ATM vol -1.4v (62.2-> 60.8), Dec 25d RR vol +0.2v (2.1 -> 2.3)
Attempt to break higher stalled at the range resistance level of $64–65k and we witnessed a sharp reversal lower to sit upon the short-term support levels of 57k
A break of $57k would open up a bigger move down to test the range support at $53–54k. We think that risk-reward very short term is skewed towards an attempted test of the lows, but any strong reversal signals will likely mark a strong base from which upward momentum could build into FOMC and US Election
Market Themes:
Generally another quiet week across markets, with market participants still reeling from the aggressive moves earlier in the month and enjoying the last of summer before a busy run-in to the US election and year-end
Crypto prices struggled for upward momentum once again, with the USD still benefitting from its superior carry and the Fed’s cutting cycle feeling priced in at this point. BTC/USD rejected the $64–65k resistance and flushed back below $60k, opening up a potential test of the lower end of the $50–70k range in the coming sessions. Meanwhile ETH/USD continues to trade poorly, unable to overcome what seems to be a wall of offers around $2800
US betting odds have moved closer to 50–50 between Trump and Harris, which is dampening any exuberance from Trump’s ongoing bullish soundbites (despite some tentative pro-crypto comments from the Harris camp)
ATM implied vols:
Implied volatility traded with a heavy tone this week, driven by overlay call-side selling from market participants looking to take advantage of the pop higher in spot
Realised volatility was broadly subdued after a quick flush back through $60k, weighing down the front-end of the curve significantly into the weekend despite the heavy even calendar coming up in September. However, almost all of this move lower in front-end implied volatility was unwound Monday morning, with spot testing the recent lows of the range at $57k
Market continued to see demand for US election optionality, again via rolling of September/October calls to November/December. There was also some decent demand for FOMC weight on 18–19Sep, with some 13 vs 20Sep calendars being bought in the market
Skew/Convexity:
Fairly stable price action in skew this week after a decent correction lower last week; implied volatility levels did drift lower on the retracement in spot and overlay call-side selling faded towards end of the week due to the lower spot levels, putting less pressure on topside skew and fly
Flies generally reflated higher across the curve after reaching some quite depressed levels last week; we continue to think vols will pick up on any test/break of the well established $50–70k range
Good luck for the week ahead!
