BTC Volatility Weekly Recap (July 6–July 13)

Key Market Indicators (Hong Kong time 7/6 16:00 → 7/13 16:00) BTC/USD: unchanged (62,900 USD → 62,900 USD) ETH/USD: up 1.1% (1,765 USD → 1,785 USD)

BTC/USD Spot Technical Outlook

Last week, the BTC spot price continued to trade sideways, consistent with the technical indicator structure we have been tracking over the past several weeks. In the short term, after news that MicroStrategy (MSTR) sold BTC was released, the market saw a knee-jerk reaction and quickly dropped, but found support around $61,000. Meanwhile, in the latter half of the week, price moved up into the $64,000–$64,500 area and met clear resistance. At this time, we still expect BTC to maintain a sideways-to-stronger trend. We expect there is still a chance of another dip into the $60,000–$61,000 support zone, followed by a gradual rise over the next 4–6 weeks toward $68,000. If the $60,000–$61,000 support is broken, the coin price will most likely first pull back to $58,000, and could even complete a larger corrective wave, dipping into the $50,000–$55,000 range. Conversely, if $64,500–$65,000 resistance can be effectively broken through, it would first attempt to break $68,000, and then challenge the more important resistance level at $74,000. At that point, the market will ultimately decide whether the current lows have already been confirmed, thereby kicking off a new uptrend; or whether it will drop again, ultimately breaking below $60,000 to complete the final leg of the dip and lay the foundation for a larger-level upmove later this year.

Market Theme

Last week, overall risk appetite improved. Even though the U.S.-Iran situation briefly became tense again, because negotiations between both sides were still ongoing, the market largely ignored the impact of the initial escalation. However, developments over the weekend showed the conflict has further escalated, so today the market has re-entered a risk-averse mode. Oil prices are again pressing toward last week’s high, nearly fully reversing the pullback that followed the earlier spike. The global economy is still showing strong adaptability—for example, China is relying more on prior reserves rather than continuing to buy at high oil prices. But if the Middle East situation cannot be resolved for the long term, this ongoing uncertainty will continue to suppress the performance of risk assets throughout the summer. (If there were a clear solution, earlier rounds of talks should have already produced results.)

Even though MicroStrategy announced in its weekly disclosure that it sold about 3,500 BTC in the prior week, overall sentiment in the crypto market improved versus the week before. The market finally saw its first net ETF inflow in weeks. However, BTC still faces strong resistance in the $64,000–$64,500 area, and today’s broader risk appetite decline also weighed on the price, dragging it lower again. From positioning, overall allocation remains light: short-term traders clearly covered shorts as price rallied up and squeezed toward the $64,000 area; mid-term investors have continued to reduce positions over the past 4–6 weeks; and miners’ trend of selling BTC is still ongoing. Therefore, we continue to expect BTC to keep trading sideways in the $60,000–$65,000 range, unless the Middle East conflict escalates meaningfully—otherwise, it will be hard to open up new downside room.

BTC US Dollar Options: ATM Implied Volatility BTC ATM Implied Volatility

Implied volatility continued to decline last week, tracking the drop in realized volatility. Especially when calculated using the daily fixing prices, 1-week Fix-to-Fix realized volatility is about 20%; by comparison, higher-frequency realized volatility is slightly higher at about 38%. Although market volatility was elevated for a short time after MSTR-related news was released, the overall trading range narrowed noticeably. BTC mostly fluctuated within the $61,300–$64,600 range during the week, with most fixing times clustering around $63,000. This suggests that spot and perpetual contract trading volumes are on the lighter side, and the market is in a Long Gamma state overall, so volatility has been suppressed.

As we enter the traditional summer off-season, BTC has gradually found a new equilibrium range, and the volatility term structure has started to steepen again. We still expect realized volatility to rise again after September. The main reasons are that the U.S. midterm elections are approaching and the macro environment remains full of uncertainty (market expectations for the first Fed rate cut have been pushed back from the 7–8 month window to 9–10 months).

BTC Options:

Last week, the skew’s price direction changed little overall. Currently, there is still a large amount of above-market Call selling from hedging sellers. Because of the one-sided flow on the Call side, the market is unwilling to further lift implied volatility there. Meanwhile, because BTC has continued to trade sideways and consolidate, the cost of holding skew positions at these relatively high levels has become increasingly high. Therefore, we expect skew to stabilize near current levels and slightly decline going forward.

Kurtosis overall is slowly falling. The main reasons include the market continuing to absorb large amounts of sell orders from the upper tail (far out-of-the-money Calls), while at the same time pricing of downside tail risk (Fat Tail) is also starting to decrease. As the cost of holding protection below becomes more and more apparent, and because the market fundamentals have improved, the bearish impact from MicroStrategy selling BTC has been gradually digested by the market. Therefore, the market believes the risk of an extreme downside tail has weakened. Looking at last week: kurtosis pricing in the curve’s middle (Belly) remained basically stable; but the kurtosis for very short tenors continued to face pressure, because time-value decay is faster and short-dated options wings have continued to be influenced by supply from hedging sellers.

Wishing you a smooth week of trading!