SignalPlus Volatility Column (20240416): Tension Spreads

Yesterday (15 APR), U.S. retail data performed strongly, with a month-on-month increase of 0.7%, significantly exceeding expectations of 0.4%. The previous value was also revised up from 0.6% to 0.9%. Market expectations for a rate cut by the Federal Reserve have been further delayed, with the probabilities of no rate cuts in June and August at 80% and 54%, respectively. U.S. Treasury yields have also gradually risen, with the two-year/ten-year yields reported at 4.946% / 4.655%. U.S. stocks faced downward pressure, with the Dow/S&P/NASDAQ closing down 0.65% / 1.2% / 1.79%.

Source: SignalPlus, Economic Calendar

With the further escalation of the Middle East conflict and the repeated delay of U.S. rate cut expectations, digital currencies are also experiencing low-level fluctuations in a market filled with risk-averse sentiment. BTC has once again declined after a brief rebound due to the approval of ETFs in Hong Kong, repeatedly falling below the important support level of $62,000.

Source: SignalPlus, BTC has repeatedly fallen below the $62,000 support level

From the data, this round of decline was mainly triggered by the liquidation and stop-loss of futures longs. The funding rate has returned to a relatively neutral level (even reaching negative values at times). On a positive note, this round of deleveraging has allowed BTC's overall position (relative to early March) to enter a relatively healthy state.

Source: Coinglass, funding rate returns to neutral, leveraged market sentiment cools

On the other hand, the direct impact on BTC prices is greater due to this week's halving. According to Bitfinex, a large number of BTC holders on centralized exchanges have chosen to exit recently, while the number of BTC in addresses inactive for over a year has also decreased to a new low in nearly 18 months. This reveals the behavior of long-term holders (LTHs) reducing their positions or continuously moving their holdings off exchanges, while short-term holders (STHs) are continuously absorbing the positions they sell. If the flow of STHs can continue, the price may continue to gain upward momentum.

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

In terms of options, the front-end Vol Skew has dropped to its lowest point in the past three months, with a considerable number of Long Put positions established at several important strike prices for BTC and ETH in April. Meanwhile, under such a steep IV Surface, the selling pressure on front-end call options for BTC remains strong; only a few large sell put spreads have been executed at relatively far levels below $60,000, and the market's bullish sentiment has been completely suppressed by the tense risk-averse mood over the past two days.

Source: SignalPlus, Vol Skew is at a historical low

Source: SignalPlus

Data Source: Deribit, BTC trading distribution

Data Source: Deribit, ETH trading distribution

Source: Deribit Block Trade

Source: Deribit Block Trade