SignalPlus Volatility Column (20240708): Embrace Uncertainty

In the past 24 hours, the market witnessed a significant plunge in BTC after the Asian market opened, with the price briefly dropping below $55,000. It then rebounded gently and made a strong jump back to around $57,500 at the settlement point. The actual volatility surge put both sides of the short gamma positions in a difficult situation, leading to a substantial increase in implied volatility of options, forming an inverted pattern.

Source: TradingVie; SignalPlus, ATM Vol

Looking at the current situation, the community has clearly divided into two different voices. Pessimistic traders point out that the selling pressure from the German government, the U.S. government, and the three major forces in Mentougou has not yet dissipated, and the price may continue to decline. However, today, more optimistic traders in the community have voiced their opinions, first denying the excessive impact of government selling pressure, noting that the amount of BTC sold by the government is only 4% of the last bull market; on the other hand, even in a downward trend in Spot, ETFs are still bringing positive capital inflows to the market, most of which have gone to FBTC. We can also see that the consulting company Metaplanet, known as Japan's MicroStrategy, purchased 42,466 Bitcoins yesterday at a value of $2.5 million, bringing the company's total holdings to 203,734 Bitcoins, with an average price of around $62,000.

Source: Farside Investors

How the road ahead will unfold, for now, no one can provide a confident answer. A group of traders is focusing on this week's macro events, including a speech by Federal Reserve Chairman Powell and the release of significant CPI/PPI data. In a few weeks, there will be a new round of FOMC meetings, and in the current unclear situation, macro indicators may become an important signpost. Moreover, the market expects that the approval of the Ethereum ETF will come on the 11th-12th of this week, injecting more uncertainty into the market, with exciting developments scheduled for the latter half of the week.

Source: SignalPlus, Economic Calendar

Source: Deribit (as of 8 JUL 24 16:00 UTC+8)

From a trading perspective, due to the significant data release on the 11th-12th and the potential approval of the ETF, traders are buying a large number of ETH put options for July 12 to protect their long positions. BTC, on the other hand, saw a rebound in price, providing confidence for traders to sell July 12 put options, while the trading volume of long-dated call options surged, primarily consisting of buys on the wings and sells on the further tails, forming a long call spread flow.

Data Source: Deribit, Overall BTC Trading Distribution

Data Source: Deribit, Overall ETH Trading Distribution

Source: Deribit Block Trade

Source: Deribit Block Trade