SignalPlus Volatility Column (20240726): Beware of the Weekend

In the past two days, concerns about the impact of the AI investment bubble on traditional markets have not only led to a collective decline in U.S. stock indices but also put pressure on cryptocurrency prices. Additionally, strong U.S. GDP data (recorded at 2.8%, expected 2%) and allegations against Bitfinex and Tether for market manipulation have cast a shadow over bullish sentiment.

Source: SignalPlus Economic Calendar

The last two days have been particularly tough for ETH. Although the inflow of funds from the three giants on the first day of the ETF listing offset the selling from Grayscale, the selling of ETHE in the past 48 hours has not slowed down, while inflows from other products have been siphoned off, resulting in net outflows of $152 million and $133 million, respectively. ETH once dipped to around 3070, retracing nearly half of the gains made since the bottom rebound in early July, but today it has slightly rebounded back to around 3250. However, some analysts express optimism about the eventual inclusion of staking features for the ETH Spot ETF, believing this will enhance the ETF's attractiveness and prompt the market to reconsider and weigh the potential short-term risks against long-term gains.

Source: TradingView; Farside Investors

In terms of options, the 28 JUL 24 options that expire on the day of the 2024 Bitcoin Summit received a warm welcome from the market upon launch, with the market pricing in extremely high volatility expectations into the forward implied volatility for that day, with ATM VOL priced at a high of 90%. At the same time, the Vol Skew curve surged significantly due to the market's positive expectations, leaning towards call options. However, such a high Vol Premium also attracted the attention of traders, leading to intense selling of Calls at 67000/68000/69000 (see the trading distribution in the chart below).

Source: Deribit (as of 2 MAY 16:00 UTC+8)

Source: SignalPlus

Source: SignalPlus

Data Source: Deribit, overall distribution of BTC trades

Data Source: Deribit, overall distribution of ETH trades

Source: Deribit Block Trade

Source: Deribit Block Trade