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

Key Indicators: (November 4th, 4:00 PM - November 11th, 4:00 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-day skew rose by +0.1 points (3.1 - 3.2)

After confirmation of Trump’s succession as the next president, the price broke through the $74k resistance level. Between Tuesday, November 5th, 4:00 PM (Hong Kong Time) and November 8th, 4:00 PM, the price rose 11% to reach our bullish target range for the election ($76k - $78k). Since then, upward momentum has continued to strengthen. We remain optimistic about BTC post-election and set long-term price targets above $100k. In the short term, we may see some price fluctuations or retracements, but the technical outlook still supports a bullish view. We believe the current major support levels of $74k - $72k will hold, considering the possibility of short-term aggressive profit-taking and a market correction. Market Themes The gap in win probabilities between the top two presidential candidates has narrowed, causing short-term spot market liquidations and a drop to $67k. Nevertheless, Trump ultimately secured the presidency, and Republicans also gained majorities in the House and Senate. This has confirmed a new catalyst that the crypto market has been waiting for. After the initial post-election rally to the $75k-$76k range, prices surged forward, breaking the key psychological level of $80k over the weekend. Meanwhile, with ETH back above $3k, other altcoins also saw significant gains. The Federal Reserve announced a dovish rate cut on Thursday night after the election, and the loose macro environment continues to support risk assets performing well before year-end. China’s stimulus policies released on Friday failed to attract much market attention, as the market generally sees no strong reason to reduce risk assets in the short term. This will continue to boost cryptocurrency prices. Despite the USD strengthening against other fiat currencies due to Trump’s election victory (partly driven by rising US yields), prices showed little reaction to the new narratives supporting crypto regulation and potential strategic reserves. This situation may persist for the next few months until further confirmation encourages more capital inflows. ATM Implied Volatility

BTC ATM Implied Volatility (November 4th - November 11th, 4:00 PM Hong Kong Time) Volatility surrounding the election event ended with relatively low pricing. In the two days before the event, the market gradually lowered the implied volatility to around 5.5%, but the actual daily move on election day approached 8.5%. The election outcome also caught the market off guard, as many expected a more intense race and increased the mid-November to longer-dated premiums in anticipation of delayed results. Ultimately, these premiums were aggressively cleared after the election. Post-election, implied volatility levels have been trending downward, mainly due to market expectations of higher volatility in higher price ranges (using traditional call spreads) and selling pressure. Meanwhile, interest in directional trading via options has been limited, aside from some rollovers at strike prices. As the new administration takes power, there is a structural argument that volatility may weaken. If Trump successfully pushes for regulatory measures on cryptocurrencies by US institutions, it could trigger a new wave of capital inflows. This influx would support prices and reduce volatility. Additionally, aside from the election event, the actual volatility of prices over the past few months has also fallen to just above 40, further confirming this view. However, we must note that there is still a long way to go before Trump can secure approval for cryptocurrencies through Congress. Skew/Kurtosis

Despite bullish market sentiment, skew remained largely unchanged this week. It still reflects a classic upward structure (mainly driven by selling pressure and bullish option spreads), creating a bullish skew for higher price volatility, which has not yet been offset by new demand. Therefore, the correlation between price increases and implied volatility has not been well expressed, affecting skew and diminishing bullish sentiment and downside supply. Currently, kurtosis is gradually declining, but we believe it has been oversold. Although spot prices may stabilize within a new local range, risk events could still trigger a surge above $100k or a drop below $60k-$65k.
Good luck everyone in the coming week!