BTC Volatility Weekly Review (May 12-19)

Key Indicators: (May 12, 4 PM -> May 19, 4 PM Hong Kong Time)

• BTC down 1.5% against USD (104.8k USD -> 103.2k USD), ETH down 5.3% against USD (2.54k USD -> 2.405k USD)

BTC to USD Spot Technical Indicators

• Since the price broke into a higher range (101-110k USD), market activity has shown low volatility, both in high-frequency and daily terms. Balanced buying and selling have kept the price well-controlled within this range. Considering the market's consistent volatility cycle, we find that the past year and a half has generally seen cycles of 14-20 days, rarely exceeding 20 days, suggesting that market patience may be exhausted in the coming week. We will either attempt to break the historical high again or drop to the 90-95k USD range for a long-term consolidation.

• Although we still acknowledge that there may be pullbacks during the consolidation period, it is worth noting that recent price support has been very strong. We are increasingly confident that a push to 125k USD is imminent and will arrive faster than we initially expected. The current price trend is not yet clear, but we anticipate significant market follow-through once the price breaks above 110k USD.

Market Themes

• Last week, overall market risk sentiment improved, with US-China tariffs reverting to pre-increase levels (was it all just a nightmare?). US macro data has also been favorable for the market, including a slight slowdown in the CPI index. US stocks have completely erased the sell-off triggered by the trade war and are beginning to eliminate the pricing reassessment caused by "US economic slowdown." Moody's downgrade of US debt from AAA to AA1 ultimately did not cause much of a stir, as the "knee-jerk reaction" from US stocks quickly faded, but the dollar and long-term US bonds did see corresponding price reductions. From a macro fundamental perspective, any further rise in US stocks will be very painful, as the market has been forced to lighten positions or close out at relatively cautious/pessimistic levels over the past week.

• The Bitcoin market has remained well within its range, even as Saylor continues to actively "buy the dip" (last week purchasing 7390 BTC at an average price of 103.5k USD). There are still many sell orders at 105-107k USD; on Monday, the price briefly tested this area but quickly retreated to 102k USD, then returned to the 101-107k USD midpoint that we have been stuck in for several weeks. Ethereum briefly peeked at the 3k USD mark before touching 2.8k USD and then stabilizing around 2500 USD.

BTC ATM Implied Volatility

• It was another week of low volatility, with the price fluctuating rapidly on Monday before the volatility was only slightly above 30, leading to a continued decline in implied volatility last week, with the early morning spike on Monday quickly disappearing. Overall, it feels like the market still holds bullish volatility, as there is significant selling pressure on both sides of price movements. As we continue to be suppressed within the 101-107k USD range, options demand will also remain muted.

• The volatility term structure remains very steep, with June and July expirations declining at a rate of 1-1.5 points (not considering changes in the term structure). This means that even holding long positions in the far end is very challenging (despite the absolute level of implied volatility being low). Market makers appear to hold long positions in June or July while continuously selling the front end to support losses in the back end. This is also why the front end is pressed so low (almost as low as actual volatility).

BTC Skew/Kurtosis

• After ending a relatively stable week, skew sharply tilted upward on Monday morning as the price broke above 106k USD, but was then very volatile and pulled back to 102k USD, causing the skew to follow suit. However, with significant buying demand at the 100-101k USD level, the market is increasingly concerned that the price will experience significant upward volatility beyond historical highs, thus skew prices are tilting upward again.

• Kurtosis has remained flat after bouncing back from a low point, with ongoing selling pressure still suppressing kurtosis. However, the market is also aware of the potential for actual volatility to surge outside the 101-107k USD range, leading to a decrease in willingness to sell outside the range.

Wishing everyone good luck this week!