Key metrics: (23Sep 4pm HK -> 30Sep 4pm HK):
BTC/USD flat ($63,500 -> $63,500) , ETH/USD -1.5% ($2,640 -> $2,600)
BTC/USD Dec (year-end) ATM vol -2.6v (59.4-> 56.8), Dec 25d RR vol -0.5v (3.2 -> 2.7)
Spot Technical Outlook
The market was able to briefly rise above the key resistance levels of $65.2–66k, but the price action again faltered there and the first major test of the long term flag resistance has so far been rejected
The range resistance here should operate as short term support for now but if it breaks below we will likely drift down to 62.5k
Remain long term structurally bullish but tactically neutral; look for confirmation of a clean break of $66k to engage in fresh addition of length
Market Themes:
China finally delivered on long-awaited stimulus and this drove a fresh leg of bullish sentiment for regional equities and also for global growth. The pass-through effect of this is also likely to keep inflation stickier globally should they be successful, which may erode real-rates globally for FIAT currencies with most G10 central banks in cutting cycles (ex-Japan). As such, crypto prices rose on the week initially to test local range highs, before retracing to end up broadly unchanged on the week
US presidential polls edged back closer to 50/50, though positive soundbites with regards to crypto came out of the Harris camp again last week. We expect to see both administrations continuing to pay lip service to the crypto community in the run up to the event, so we are cautious to read too much into this — particularly any ‘pivot’ from Harris/Democrats
ATM implied vols:
ATM Implied Volatility for BTC$ (23–30Sep 4pm HK)
Realised volatility remained extremely subdued as spot ground higher from $63.5–66k last week, with plenty of offers clearly loaded ahead of the key resistance levels. High frequency and fix-to-fix realised clocked in the mid 30s vs daily implied vols in the mid-high 40s
The lack of realised volatility on the move higher combined with a lack of fresh catalyst saw vol prices drop fairly aggressively across the board this week, with November expiries onward dropping by over 2vols on the week. The current risk-friendly macro backdrop seems to be supportive of buy-on-dip strategies which are vol-suppressive, while any material breakout higher will require some help from the election/Trump at this point
We expect gamma performance (and hence front-end implied contracts) to remain heavy for the next couple of weeks as spot settles in the $62.5–65.5k range, having failed on the topside breakout
Election variance has priced lower once more as the market took out risk premium from the implied volatility curves in general; with the election now just over 4 weeks away it is a matter of time before attention pivots to this as the next potential fresh catalyst for the cycle, which should drag the event pricing higher as we approach
Skew/Convexity:
Skew prices retraced their move in favour of topside from last week, as realised and implied volatility was lower despite the spot move higher intra-week. Covered call strategies and punitive derive/smile roll drove liquidation of skew length
Flies actually ticked up during the week with demand for range-breaks both sides, particularly over the election — driving November fly pricing higher. We would feasibly expect vols to rally either side of this $60/70k range so this seems broadly justified
Good luck for the week ahead!
