SignalPlus Volatility Column (20240506): Macroeconomic Good News, BTC Recovers Lost Ground
In the context of a warming risk market sentiment, there is also a significant piece of good news in the digital currency sector: the flow of GBTC has finally reversed, achieving positive inflow, which indicates a weakening of the BTC short-selling forces and reduced selling pressure.
Last Friday, positive news came from the macro level. The U.S. April non-farm payroll data was significantly lower than expected, and the hourly wage growth also showed signs of cooling, which strengthened the market's bets on two rate cuts by the Federal Reserve this year. U.S. Treasury yields fell significantly, with the current two-year and ten-year yields at 4.791% and 4.474%, respectively.
On the other hand, the geopolitical crisis has eased somewhat, as the Israeli Prime Minister expressed a willingness to pause fighting in the Gaza region in exchange for hostages. If an agreement is successfully reached, it will bring positive news to risk markets.
Source: Signalplus, Economic Calendar
Source: Investing
In the context of warming sentiment in risk markets, there was also a significant piece of good news in the cryptocurrency space: the flow of GBTC finally reversed, achieving positive inflows, which indicates a weakening of BTC short positions and reduced selling pressure. In terms of price, since Friday, the market has gradually realized the macro positives and expectations of liquidity injections from the U.S. dollar, with BTC rising from 59,000 to around 65,000, completely recovering the losses from the previous week.
Source: Farside Investors; TradingView
In terms of options, the recent rise in actual volatility has driven up the front-end implied volatility. Currently, the IV levels for BTC and ETH are around 56% and 65%, respectively. ETH's overall volatility premium is significantly higher than BTC's. The front-end implied forward IV includes uncertainties brought by the U.S. SEC's decisions on the VanEck Ethereum spot ETF (May 23) and Grayscale's Ethereum futures (May 30).
Source: Deribit (as of May 6, 16:00 UTC+8)
Source: SignalPlus
In trading, strong selling pressure on ETH call options is concentrated around mid-May, particularly for the 3600-C options expiring on May 17 and May 24. For BTC, traders are shorting put options near 62,000/61,000, showing confidence in this rebound, while also buying a large number of OTM call options for May 31, optimistic about BTC's upward potential this month.
Data Source: Deribit, overall distribution of ETH trading, strong selling pressure on call options in mid-May
Data Source: Deribit, overall distribution of BTC trading
Source: Deribit Block Trade
Source: Deribit Block Trade
