BTC volatility (July 13 - July 20)

Key metrics (Hong Kong time: from 4:00 p.m. on July 13 to 4:00 p.m. on July 20): — BTC/USD rose 2.0% ($62,900 → $64,150), ETH/USD rose 4.2% ($1,785 → $1,860) BTC/USD spot technical outlook

Last week, BTC (and ETH) price performance remained relatively strong versus the broader market. Overall, it aligned with the medium-term technical analysis we have been continuously tracking over the past few weeks, and it has also been driven by rising expectations that the《CLARITY Act》will make progress in the U.S. Congress ahead of the summer recess starting August 8. In the short term, despite broad risk-off sentiment in the stock market driven by deleveraging related to the Korea Composite Stock Price Index (KOSPI) and AI trades, and despite further escalation in the Iran–Iraq war situation, BTC has still found support above $62,000. Meanwhile, strong resistance remains in the $64,500 to $65,000 area. — At this point, we still expect price to grind higher in a sideways consolidation pattern, and we also note a positive signal: short-term lows are continually being raised. As《CLARITY Act》becomes a key focus for the market, related headlines may introduce some noise and disrupt short-term technical price action. However, we will still focus mainly on the support zone below $60,000 to $61,000. If this area is breached, price may first attempt to revisit $58,000, and could then form a final leg of a sub-wave selloff, with targets pointing to $50,000 to $55,000. On the other hand, if price clearly breaks above resistance around $64,500 to $65,000, we expect it to first attempt a breakout toward $68,000, followed by further upside toward stronger resistance near $74,000. At that time, the market will ultimately need to judge whether this round’s low has already formed and whether price can continue to move sharply higher; or whether price turns weaker again, with the final break below $60,000 before starting the more substantive uptrend later in the year. ## Market theme -Last week, the market overall showed risk-off sentiment, even though below-expected CPI data provided a brief boost to risk assets early in the week. However, the Iran–Iraq situation continued to heat up, eventually feeding through to oil prices: Brent crude broke above $90 per barrel, up slightly more than 20% from the recent low. Meanwhile, KOSPI and AI-related trading in the stock market continued to deleverage. The number of bankruptcies among young adult retail investors in South Korea has been rising, and regulators have started taking measures to limit further leveraged trading in the near term. Overall, we believe the latter is a healthy adjustment for the market; the former may continue to weigh on risk assets throughout the summer. If geopolitical uncertainty remains prolonged, it could keep oil prices elevated and keep interest rates at higher levels for longer. With no clear solution in sight, tail risks from escalation or misjudgment are rising. — Crypto market sentiment overall improved, and remarks from the White House boosted the market’s optimism regarding the《CLARITY Act》. As the summer recess approaches, the approval time window for the bill is tightening; after the recess, midterm elections could become the dominant factor on the political agenda, potentially pushing the bill’s passage timeline to 2027. The market continues to record ETF inflows, but the $64,500 to $65,000 area still faces strong resistance. Overall, current market positioning feels very light. Short-term traders covered shorts when price was squeezed up toward $64,000, while medium-term investors have clearly reduced or exited positions over the past 4 to 6 weeks; we continue to observe a trend of miners selling coins. Although the market has built some upward positioning for the next two weeks, if the《CLARITY Act》is approved within the next 2 to 3 weeks, the market would likely be forced to chase price higher, pushing BTC up to $68,000. The current Polymarket implied probability of passage is 38%, which means there is still significant upside room once the bill lands. On the other hand, if a war in the Middle East keeps risk-off sentiment elevated and the《CLARITY Act》fails to pass within the next 2 to 3 weeks, disappointment could drag BTC back down to $60,000 to $61,000. Since ETH previously outperformed BTC due to optimistic expectations, if sentiment flips, ETH may be more prone to a rapid drop toward $1,600. BTC volatility

Last week, implied volatility trended overall lower, although actual volatility rose slightly from the extremely low level of the prior week. Even so, much of the volatility was still driven by event factors, mainly including CPI data and market optimism about the《CLARITY Act》. As we move deeper into mid-summer, market participation continues to decline, and investors are increasingly comfortable with BTC temporarily holding within a wide range of $60,000 to $66,000. The only exception is that contracts expiring on July 31 saw some demand for highly leveraged upside, used to hedge scenarios where the《CLARITY Act》might accelerate approval before the summer recess; this also pushed up implied volatility for that maturity. Even then, this is still only a highly concentrated short-term bet. Even if the bill is approved, the market has not shown interest or expectations for structurally sustained upside in price. On the other hand, because spot positions in the market are clearly reduced, we did not observe a meaningful demand for downside hedging. At the same time, covered call sellers continue to sell call and put options on both sides of the current trading range to enhance returns in the current range-bound environment. — As the market officially enters summer and spot prices keep consolidating within this equilibrium range, the term structure of implied volatility has started to become steeper. We still expect actual volatility to rise starting in September, especially considering the U.S. midterm elections and the broader macro backdrop. Market expectations for the first Fed rate cut have been pushed back from July–August to September–October. However, given that we are currently approaching mid-summer, the market currently shows no interest in trading performance in September or October. This further decreases the valuation of implied volatility for far-dated tenors, bringing it down to the low end of the past two years’ range. We believe these levels could start to be considered for accumulating long positions as a value investment strategy. BTC skewness / kurtosis

Last week, skew pricing for put options softened in terms of the degree of bias, mainly because BTC still performed relatively strongly in an external risk-off environment, while upside demand in short-dated tenors began transmitting into the overall volatility curve. We also observed that some covered-call sellers, who previously focused mainly on selling call options, have started adding the sale of downside options into their strategies. This reflects that as recent price lows keep being raised, they have begun to show some confidence in the direction of lower prices. — Current kurtosis pricing is getting some support near existing levels. As skew is repriced, downside-end volatility appears relatively lower compared with recent levels. Given the current geopolitical backdrop, the market is still unwilling to sell downside tail risk at too low a price. In addition, because MSTR and STRC have not shown any clear signs of recovery, Saylor may still need to keep selling assets over the coming months; therefore, the market remains cautious about downside tail risk. On the upside, demand for single-leg long call options and narrow call spreads has, overall, absorbed some of the volatility in the upside wing. Previously, due to a heavy supply of covered call option selling, the market had accumulated a large long volatility exposure in that segment. Now this supply pressure has eased somewhat, which further supports kurtosis pricing. Wishing you a smooth trading week!