SignalPlus Volatility Column (20240415): Hong Kong officially approves BTC and ETH spot ETFs, cryptocurrency prices rebound from lows

Recently, as expectations for a Federal Reserve interest rate cut have gradually faded and the escalation of the situation in the Middle East has prompted investors to shift towards safe-haven assets, the three major U.S. stock indexes have fallen by about 1.5%. The U.S. dollar index briefly broke above 106, and after retreating from its highs over the weekend, U.S. Treasury yields rebounded, with the current two-year/ten-year yields at 4.94% / 4.577%.

Source: SignalPlus, Economic Calendar

The conflicts brought about by geopolitical issues have also impacted digital currencies. Bitcoin plummeted from $69,000 to $59,000 last Friday, resulting in over $1 billion in futures long liquidations within 48 hours. The subsequent rebound in the market was partly attributed to the Hong Kong Securities and Futures Commission (SFC) officially announcing the approval of Bitcoin and Ethereum spot ETFs, boosting market confidence. This approval not only came ahead of the U.S. but also allowed for physical subscriptions and redemptions of the ETFs.

Source: SignalPlus & TradingView

During this price drop, "whales" in the digital currency market significantly bought into ETH at its lows. For example, an address starting with "0x E 34" timed the market perfectly, increasing its position by acquiring 1,000 ETH worth $3.15 million at the lowest point, bringing its total holdings to 8,300 ETH.

Source: Twitter

In terms of options, although the coin price has recovered nearly half of its losses, implied volatility remains high, with ETH trading about 10% higher in volatility than BTC. The term structure remains inverted, and the Vol Skew is at a low point over the past three months (25th percentile).

On the trading front, BTC saw a significant number of Long Put Spreads on April 19 and April 26, possibly as further protection against the volatility brought by the halving event on April 18-20. On the other hand, the price adjustment has attracted traders to buy on dips, particularly at the end of May, with bullish options positions like Buy BTC 69000-C (850 BTC) and ETH 3800-C (10,542 ETH) becoming the market focus.

Source: Deribit (as of April 12, 16:00 UTC+8)

Source: SignalPlus, ATM Vol continues to decline

Data Source: Deribit, BTC trading distribution

Data Source: Deribit, ETH trading distribution

Source: Deribit Block Trade

Source: Deribit Block Trade