BTC Volatility Weekly Review (May 5 - May 12)
The market intends to test the resistance level of 99-100 thousand dollars and successfully breaks through, bringing us to 101-110 thousand dollars, and surprisingly encounters little resistance. Overall, although the increase throughout the week is considerable, the actual volatility remains low, as there are sellers hedging from profit-taking and long gamma positions above the price, resulting in a very orderly price movement when rising.
Key Indicators: (May 5, 4 PM -> May 12, 4 PM Hong Kong Time)
- BTC against USD rose by 10.7% (94.7k USD -> 104.8k USD), ETH against USD rose by 39.2% (1,825 USD -> 2,540 USD)
The market intended to test the resistance level of 99-100k USD and successfully broke through, bringing us to 101-110k USD, surprisingly encountering little resistance. Overall, while the weekly increase was significant (10.7%), actual volatility remained low, as there were sellers hedging from profit-taking and long gamma positions above the price, resulting in a very orderly price movement during the rise.
The market has risen nearly 40% from the low of 74-75k USD within a month, which is quite substantial. This also confirms that we are entering the final phase of this trend since last September. Currently, we expect the market to consolidate between 92-106k USD in the coming weeks, but there is a possibility of continued local upward extension. We remain bullish on BTC and anticipate reaching 115-125k USD in the next few months or quarters, which is our current long-term target. From a technical perspective, considering that this rise has been stronger than expected, there is a chance we could reach 130-135k USD.
Market Themes
Other market activities this week have been very quiet. The market ignored the Federal Reserve's comments about "not rushing to cut rates," still expecting 2-3 rate cuts in the coming year. The main topic of discussion remains Trump's trade war, especially the announcement on Monday to cancel the tariff rate on China (a reduction of 115%), ending nearly a week of negotiations. Meanwhile, other trade agreements are gradually being finalized, including the US-UK agreement announced last weekend. The market has completely unwound the stock sell-off caused by tariffs, and even eliminated some of the pricing adjustments due to concerns about a slowdown in the US economy, with the S&P index almost back to the beginning of the year levels.
Back to cryptocurrency, the bullish sentiment in US stocks combined with Bitcoin fully breaking through 100k USD has been enough to revive the small coin market. In particular, Ethereum has shown obvious small coin characteristics, surging nearly 40% throughout the week, liquidating a significant number of structural short positions. There haven't been many ETF trades on Ethereum; instead, there has been robust inflow into Bitcoin. Therefore, although this small coin rally has caused a lot of panic, the overall environment dominated by Bitcoin has not undergone substantial changes, and the fluctuations in small coins seem more like short-term washouts.
BTC Implied Volatility
Last week, despite the coin price fully breaking through 100k USD and approaching 106k USD, implied volatility struggled to rise. Overall, actual volatility remained quite stable, despite significant overall fluctuations, with the high-frequency actual volatility only around 37 for the entire week. The buying demand from speculators was minimal, and tactical call spreads were the only buyers of volatility. Meanwhile, there was continuous selling pressure on both wings, as the market reduced delta exposure through covered calls at high price points, while some players accumulated profits by selling put options.
Currently, unless there is a significant breakthrough or notable catalyst, we expect the coin price to further stabilize and further compress implied volatility. The market has accumulated a large number of longs due to ongoing selling pressure, and the term structure has become very steep, with implied volatility for June and July rolling down at a rate of about 1-1.5 points per week, indicating that even holding long positions in this environment is quite challenging (though it must be acknowledged that the absolute level of implied volatility is still low).
BTC Skew/Kurtosis
The skew price was extremely biased upwards when it first broke through 100k USD this week, as the market was concerned about a explosive breakout above the key resistance level of 99-100k USD. However, it was later found that there was a large amount of spot and perpetual selling due to profit-taking and long gamma in the market, resulting in a very orderly price movement. This encouraged more players to sell call options, causing the skew to pull back from its upward bias. Ultimately, as the price corrected downwards, the skew ended the week relatively stable.
The kurtosis has been continuously suppressed due to selling pressure on both wings. Directional trading has mainly been conducted through call spreads, resulting in net selling of kurtosis in the market. Considering that 94-106k USD appears to be a low volatility range (returning to levels seen in February and two weeks ago), we believe it is worthwhile to hold out-of-range strike prices, while local prices should continue to decline due to the stabilization of coin prices. Therefore, from a relative price perspective, we believe the kurtosis price is still too low.
Wishing everyone good luck this week!
