SignalPlus Volatility Column (20240321): Rebound!

Yesterday (20 MAR), the Federal Reserve's interest rate decision indicated a unanimous agreement to maintain interest rates, emphasizing increased confidence in the decline of inflation. The dot plot maintains the expectation of three cumulative rate cuts this year, but at least five officials have reduced the magnitude of rate cuts for this year. The median GDP expectations for the end of 2024-2026 have been raised across the board. Economic activity has been steadily expanding, but the outlook remains uncertain. Powell reiterated that the policy rate may have peaked and that if necessary, rates will be kept at a high level for a longer time, stating that a rate cut at some point this year would be appropriate, with significant labor market weakness being a reason to initiate rate cuts. U.S. Treasury yields gradually declined following the dovish remarks, and all three major stock indices rose, with the S&P closing up 0.89%, and the Dow and Nasdaq closing up 1.03% and 1.25%, respectively.

Source: SignalPlus, Economic Calendar

Source: Binance & TradingView

Cryptocurrencies continued to strengthen after the FOMC, rebounding from the $62,000 support level to just below $67,000. The tense sentiment has eased in recent days, with the implied volatility on the front end of options significantly steepening and falling back, and the skewed volatility surface has finally reversed. Strong bullish options buying for ETH at the end of March pushed the 25 d RR back to near zero, while BTC also saw bullish options positioning at the end of March, along with 387.5 sets of 68000 Long Straddles trading at 73% Vol, betting on volatility before the quarterly settlement.

Source: Deribit (as of 21 MAR 16:00 UTC+8)

Source: SignalPlus

Source: SignalPlus

Data Source: Deribit, ETH trading distribution

Data Source: Deribit, BTC trading distribution

Source: Deribit Block Trade

Source: Deribit Block Trade

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