SignalPlus Volatility Column (20240809): Two Questions

In the past 24 hours, the cryptocurrency market has focused on two main points: why did IV collapse, and why did it rise? We can find some clues along the timeline.

It all started around 7:30 PM on August 8. Prior to this, the previous day's BTC price fluctuations had gradually pushed the overall implied volatility of the market to a peak. Just as the price stabilized around 57,500, a large number of sell transactions for Dec and Oct put options suddenly appeared on the Deribit market, causing the IV for the end of the year to drop by 3% Vol in a short time, leading to a significant downward shift of the entire Vol Curve.

Source: SignalPlus Time Lapse IV / Historical IV

Source: SignalPlus Trade Volume by Expiry; Recent Block Trade

Source: Deribit (as of 9 AUG 16:00 UTC+8)

Later, at 8:30 PM, the U.S. announced a new round of initial jobless claims, with the decline being the largest in nearly a year, easing concerns about an economic slowdown in the world's largest economy. U.S. stocks rebounded strongly (the Dow/S&P/NASDAQ rose by 1.76% / 2.3% / 2.87% respectively), and U.S. Treasury yields rose. As a risk asset highly correlated with the U.S. dollar index, BTC's price was also boosted, breaking through 60,000 from 57,500 and briefly challenging the key support level of 62,000.

However, returning to the macro situation, this week has been quite challenging for global investors. SoFi's Liz Young Thomas commented, "It's volatile and everywhere. We understand the market's sensitivity to U.S. economic data, the widespread impact of yen carry trades, and investors' habit of viewing interest rate cuts as a solution to all problems."

Amid such volatile conditions, market anxiety and unease gradually accumulated, and investor sentiment remained low, which caused this typically low "High-Importance" data to trigger such significant fluctuations. Perhaps the panic that began earlier this month was somewhat exaggerated, but this data did not quell fears of recession. JPMorgan's Lakos-Bujas warned the market that the stock market is no longer a one-way upward trade, but increasingly a two-way debate surrounding the downside risks to economic growth, the timing of Fed rate cuts, excessive positions, high valuations, and rising uncertainties from the presidential election and geopolitical issues.

Source: TradingView; SignalPlus, Economic Calendar

Additionally, after these two events, we observed that the rise in coin prices led to a rebound in Vol Skew. The significant selling on the bearish side notably increased the slope of BTC from October to the end of the year, causing the 25 dRR indicator to rise sharply in a localized range, and the volatility surface underwent a noticeable transformation overnight.

Source: SignalPlus

Data Source: SignalPlus, ETH Top Trade

Data Source: SignalPlus, BTC Top Trade