BTC Volatility - Weekly Review (November 4 - November 11)

Key Indicators: (November 4, 4 PM -> November 11, 4 PM Hong Kong Time)

• BTC/USD price increased by +18.4% ($68,000 -> $81,200), ETH/USD price increased by +27.6% ($2,460 -> $3,140)

• BTC/USD year-end (December) ATM volatility decreased by -6.2 points (58.0 -> 51.8), December 25 d skew increased by +0.1 points (3.1 -> 3.2)

• After the confirmation of Trump's succession as the next president, the price broke through the resistance level of $74k. Between 4 PM on Tuesday, November 5, and 4 PM on November 8, the price rose by 11% into our bullish target range for the election ($76k - $78k). Since then, the upward momentum has continued to strengthen. We remain bullish on BTC post-election and set a long-term price target above $100k. In the short term, we may see some price fluctuations or pullbacks, but the technical core still supports a bullish outlook.

• We believe the current major support level of $74k - $72k will continue to hold, considering that the market may experience aggressive profit-taking and a pullback in the short term.

Market Themes

• The gap in the winning probabilities of the two presidential candidates narrowed before the election, leading to a liquidation in the spot market and a drop to $67k. Nevertheless, Trump ultimately retained the presidency, while Republicans successfully gained a majority in both the House and Senate. This confirmed that it was indeed the fresh catalyst the cryptocurrency market had been waiting for. After the initial post-election price rise to the $75k - $76k range, the price surged forward, breaking through the key psychological level of $80k over the weekend. Meanwhile, with ETH returning above $3k, prices of other altcoins also surged significantly.

• The Federal Reserve announced a dovish rate cut on the Thursday night after the election, and the loose macro backdrop continues to support a good performance of risk assets before the end of the year. The stimulus policies released by China on Friday failed to attract market attention, as there was a general belief that there were no strong reasons to reduce risk assets in the short term. This will also continue to boost cryptocurrency prices.

• Although the USD strengthened against other fiat currencies due to Trump's election (partly driven by rising dollar yields), the price showed no reaction to the two new narratives supporting cryptocurrency regulation and potential strategic reserves. This situation may dominate in the coming months until further confirmation supports more capital inflows.

ATM Implied Volatility

BTC ATM Implied Volatility (November 4 - November 11, 4 PM Hong Kong Time)

• The volatility surrounding the election event ultimately ended with a low pricing. Two days before the event, the market gradually lowered the time price movement to 5.5%, but the actual daily movement on election day was close to 8.5%. The outcome of the election caught the entire market off guard, as many expected a more intense election and raised premiums for mid-November to long-term options in anticipation of a delay in the election results. Ultimately, these premiums were aggressively cleared after the election.

• After the election, the level of implied volatility has been on a downward trend, mainly due to the market's bullish outlook on higher price range volatility (using traditional call spreads) and selling pressure. Meanwhile, interest in directional trading through options has been lacking as prices gradually rise, except for some rollovers seen at certain strike prices.

• With the new administration taking office, there is a structural argument that volatility may weaken. If Trump successfully pushes for regulatory measures on cryptocurrencies by U.S. institutions, it will unleash a wave of new capital inflows. This influx of capital will provide support for prices and weaken volatility. Additionally, aside from the election event, the actual volatility of prices has also decreased to just over 40 in recent months, further confirming this view. However, it should be noted that there is still a long way to go before Trump can truly gain congressional approval for cryptocurrencies.

Skew/Kurtosis

• Despite the bullish market sentiment, the skew has remained largely unchanged this week. It still reflects a classic upward structure (mainly caused by selling pressure and bullish call spreads), creating a bullish outlook on volatility at higher price points, which has not yet been offset by new demand. Therefore, as prices rise,

• The correlation between price and implied volatility has not performed well, affecting skew and eliminating the impact of bullish sentiment and downside supply.

• Currently, the kurtosis is gradually declining, but we believe it is currently oversold. Because even though spot prices may stabilize within a new local range, they could still surge above $100k or drop below $60k - $65k during certain risk-off events.

Wishing everyone good luck in the coming week!