SignalPlus Volatility Column (20240808): Volatility Resurfaces
On August 7, the U.S. Treasury issued $58 billion in 3-year bonds, with a winning yield of 3.810%, lower than the trading level before the issuance. Meanwhile, the Deputy Governor of the Bank of Japan announced that interest rates would not be raised during market instability, leading to a pressured decline in the yen; after Ripple's settlement with the SEC, XRP trading volume surged by 254%, and its price increased by 20%.
On August 7, the U.S. Treasury announced the issuance of $58 billion in 3-year Treasury bonds, with a winning yield of 3.810%, lower than the pre-issue trading level (3.812%). Except for the 2-year Treasury bonds, the benchmark yield slightly rose to an intraday high. The yield is approaching the end of the inversion, and the 10-year U.S. Treasury yield erased the decline since last Friday following the non-farm payroll data release, currently reported at 3.908%.
On the other hand, the Bank of Japan has shifted back to a dovish stance, with Deputy Governor Shinichi Uchida stating that they will not raise interest rates during times of market instability. Some factors have made the central bank's attitude towards rate hikes more cautious, putting pressure on the yen, which has declined.
Source: Investing U.S. 10-Year Treasury Yield; USD/JPY Exchange Rate
In the digital currency sector, Ripple and the SEC reached a settlement, with the fine significantly reduced from the SEC's initial proposal of $2 billion to $1.25 million. Following the announcement, market confidence was boosted, with XRP trading volume increasing by 254% to $5.3 billion and the price rising by 20%.
Regarding BTC, the price rebounded from $56,000 to $57,000 the day before yesterday. The converging actual volatility briefly showed a bearish steep trend in implied volatility, but the price did not maintain the high for long and began a new downward trend after 10 PM, finding support around $54,800. After the Asian session began, it rose again to recover all losses, with daytime volatility significantly expanding and overall implied volatility increasing.
Source: TradingView
In detail, the rising implied volatility (IV) for BTC in the long term needs more attention. The uncertainty brought by the U.S. presidential election and the subsequent Federal Reserve rate hike path are factors for the market to increase bets. Compared to ETH's performance, this change is quite distinct. Yesterday's volatility caused ETH's IV to flatten significantly, with the front end rising about 4.5% for 1 week to 1 month, while the long end, such as December, only moved 0.94% (compared to BTC's 3.07%). On the other hand, the renewed price drop has led to an increase in demand for put options, resulting in a comprehensive decline in the volatility skew of both currencies.
Source: Deribit (as of August 8, 16:00 UTC+8)
Source: SignalPlus
Source: SignalPlus, comprehensive decline in Vol Skew
Data Source: Deribit, overall distribution of ETH trades
Data Source: Deribit, overall distribution of BTC trades
Source: Deribit Block Trade
Source: Deribit Block Trade
