BTC Volatility Weekly Review (May 5-May 12)

Key metrics: (May 5, 4pm -> May 12, 4pm Hong Kong time)

• BTC/USD rose 10.7% ($94.7k -> $104.8k), ETH/USD rose 39.2% ($1,825 -> $2,540)

• The market tested the $99-100k resistance area and successfully broke through, taking us to $101-110k with surprisingly little resistance. Overall, while the weekly gain is decent (10.7%), realized volatility is low as there are sellers above the price from profit taking and hedging of long Gamma positions, and price action is very orderly on the way up.

• The market has risen nearly 40% from a low of $74-75k in a month, which is quite impressive. It also confirms that we are entering the final stage of the trend since September last year. We currently expect the market to consolidate between $92-106k in the next few weeks, but there is a possibility of continued local extension of the rise. We continue to be bullish on BTC and expect to reach $115-125k in the next few months or quarters, which is our current long-term high. From a technical perspective, considering that this wave of gains has been more aggressive than expected, there is a chance that we will rise to $130-135k.

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• Other market activity was very quiet this week. Markets ignored the Feds comments that it was not in a rush to cut rates and still expect 2-3 rate cuts in the next year. The main topic of discussion continued to be Trumps trade war, especially the announcement on Monday that the tariff rate on China was cancelled (reduced by 115%), ending nearly a week of negotiations. At the same time, other trade deals were gradually being finalized, including the US-UK agreement announced last weekend. The market has now completely eliminated the stock sell-off caused by tariffs, and even eliminated some of the pricing reductions due to concerns about a slowdown in the US economy, and the SP index is almost back to the level at the beginning of the year.

• Вернуться к криптовалютаcurrencies, the bullish sentiment of the US stock market and the fact that Bitcoin has completely broken through $100,000 are enough to stimulate the small coin market to regain vitality. In particular, Ethereum has shown obvious characteristics of a small coin, with a surge of nearly 40% in a week, clearing a lot of structural short positions. There are not many ETF transactions on Ethereum, but on the contrary, Bitcoin has seen a steady inflow. Therefore, although this wave of small coin rises has caused a lot of panic, the overall environment dominated by Bitcoin has not changed substantially, and the changes in small coins are more like short-term liquidation.

BTC Implied Volatility

• Last week, even though the price of the coin completely broke through $100k and approached $106k, implied volatility was difficult to rise. In general, realized volatility was quite flat, and despite the large overall volatility, the high-frequency realized volatility for the whole week was only around 37. There was minimal buying demand from speculative players, and tactical call spreads were the only buyers of volatility. At the same time, there was continuous selling pressure on both sides. On the one hand, the market reduced delta exposure through covered calls at the high point of the coin price, and at the same time, some players accumulated profits by selling put options.

• At present, unless there is a significant breakthrough or significant catalyst, we expect the price of the currency to stabilize further and further reduce the implied volatility. The market currently has a large number of longs accumulated due to continued selling pressure, and the term structure is already very steep. The implied volatility in June and July is rolling down at a rate of 1-1.5 points per week, which means that even holding long-term long positions in this environment is very challenging (but it must be admitted that the absolute level of implied volatility is still low).

BTC Skewness/Kurtosis

• The skewness price was extremely biased upwards when it first broke through $100k this week, as the market was worried that the price would explode through the key resistance level of $99-100k. But then it was discovered that the market had a lot of spot and perpetual selling due to profit taking and long Gamma, and the price trend was actually very orderly. Therefore, more players were encouraged to sell call options, causing the skewness to pull back from the upward bias. In the end, as the price of the currency fell back, the skewness ended the week with a basically stable trend.

• Kurtosis continues to be pushed down by selling pressure on both sides. Directional trading is mainly through call spreads, net selling Kurtosis in the market. Considering that $94-106k looks like a low volatility range (back to where it was in February and two weeks ago), we again think it is worth holding strikes outside the range, while local prices should continue to fall due to the firming of the coin price. Therefore, from a relative price perspective, we think Kurtosis is still too low.

Good luck to everyone this week!

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