BTC Volatility Weekly Review (August 4 - August 11)

Key Metrics (August 4, 16:00 HKT → August 11, 16:00 HKT)

• BTC/USD +5.9% ($114,800 → $121,600), ETH/USD +20.6% ($3,550 → $4,280)

• Breakout of the flag pattern: Last weekend, BTC strongly broke through the upper boundary of the flag pattern, clearly preparing to retest the all-time high (ATH). We maintain a bullish outlook, targeting the range of $125k--135k (potentially reaching $140k in extreme cases), which we believe could be the cycle high for this rally.
• Pullback risk: If the price stagnates and retreats here, it may enter an extended adjustment of the fourth wave, but we expect the $112k support level to remain solid. Once the upward extension pattern is confirmed, we anticipate actual volatility will rise in the next 3--6 months.

Market Themes

• Rebound in risk assets: The U.S. non-farm payroll (NFP) data initially triggered a market misjudgment, but as the expectations for Fed rate cuts were digested, risk assets experienced a healthy rebound last week. Overall, U.S. corporate earnings remain robust, combined with the Fed's rate-cutting cycle, the stock market is expected to continue its upward trend. This week, the market is focused on U.S. CPI data; if the data is mild or meets expectations, it will solidify rate cut pricing and further boost risk assets (especially high-beta AI sectors).
• Cryptocurrency follows U.S. stock rebound: After BTC held the key support at $112k, the crypto market rebounded in tandem with U.S. stocks/NASDAQ. ETH broke through the strong resistance at $4k, briefly spiking to $4.3k over the weekend and stabilizing; BTC made up for gains on Monday morning, breaking through $122k. Given ETH's recent gains, funds may rotate back to BTC or SOL; if risk sentiment does not reverse (especially if CPI confirms rate cut expectations), BTC will find support.
• Industry positives: The Trump administration has begun to fulfill its promise to support the crypto industry by signing an executive order allowing U.S. 401K pension plans to purchase cryptocurrencies and nominating BTC supporter Miran to the Federal Reserve Board.

BTC ATM Implied Volatility

• Actual volatility remains stable: Last week, actual volatility held steady at 30--32 vol, with Trump's policy boost pushing BTC back above the $116k pivot point. However, due to light summer trading, implied volatility remains sluggish. On Monday morning, spot prices rose 4% to $122.4k, briefly boosting the volatility market, but there was a lack of sustained follow-through.
• Steeper term structure: The holding costs for contracts expiring in September and October are significantly higher, reflecting market expectations that volatility will rebound after the end of summer at the end of August. Although August-expiring contracts are under pressure due to low actual volatility, CPI data and the Jackson Hole meeting may provide opportunities for volatility.

BTC Skew and Kurtosis

• Skew changes: Despite the rise in spot prices, the skew of short-term bearish options surged on Monday, possibly due to the unwinding of deep in-the-money bullish options. Demand for bullish options with expirations in September and beyond has re-emerged.
• Kurtosis spike: On Monday, kurtosis prices rose unusually high, diverging from the stable performance of ATM volatility, which also reflects potential liquidation in the market. The current kurtosis/ATM volatility ratio (0.2) is nearly twice the historical average (0.1), indicating that the market is pricing a premium for extreme volatility, providing opportunities to utilize the underlying low volatility base to position gamma.

Wishing everyone successful trading this week!