BTC Volatility: A Weekly Review from August 26 to September 2, 2024
Key Indicators (Hong Kong Time August 26 4 PM -> September 2 4 PM):
BTC/USD -9.8% ($63,600 -> $57,400), ETH/USD -12.2% ($2,735 -> $2,400)
BTC/USD December (Year-End) ATM Volatility -1.4 v (62.2 -> 60.8), December 25 d Risk Reversal Volatility +0.2 v (2.1 -> 2.3)
Spot Technical Indicator Overview
Attempt to break through the resistance level of $64-65k was unsuccessful, and BTC price quickly fell back to the short-term support level of $57k.
If it breaks below $57k, it may trigger a larger decline, challenging the price range support of $53-54k. We believe that in the very short term, the risk-reward may further dip lower, but if a strong reversal signal appears, it could form a solid bottom, laying the groundwork for the upcoming FOMC meeting and the bullish momentum during the U.S. elections.
Major Market Events:
Overall, the market was relatively calm this week, as market participants continued to digest the sharp fluctuations at the beginning of the month, enjoying the last days of summer before the U.S. elections and the busy year-end schedule.
Cryptocurrency prices lack upward momentum, with the dollar still benefiting from its higher yields, while the market has already digested the Fed's rate cut expectations. BTC/USD faced resistance at the $64-65k level, falling back below $60k, and may challenge the lower limit of the $50-70k range next. Meanwhile, ETH/USD continued to perform weakly, failing to break through the selling pressure around $2800.
Betting odds in the U.S. show that Trump and Harris have nearly equal chances of winning, which undermines the optimistic sentiment brought by Trump's continued bullish remarks (although Harris's camp has also made some preliminary supportive comments about cryptocurrency).
ATM Implied Volatility
This week, implied volatility performed weakly, mainly due to market participants selling call options to take profits as spot prices rose.
Actual volatility remained calm after a rapid drop to $60k, leading to a significant decrease in volatility at the front end of the curve, despite many important event dates in September. However, on Monday morning, nearly all declines in front-end implied volatility were completely reversed as spot prices challenged the recent low of $57k.
Demand for options related to the U.S. elections remains, primarily manifested in rolling September/October call options into November/December. Additionally, the market showed some interest in options for the FOMC meeting on September 18-19, buying some calendar spread options for September 13 vs. September 20.
Skew/Convexity:
After last week's significant correction, skew trends were relatively stable this week; implied volatility decreased during spot pullbacks, and due to the decline in spot prices, selling pressure on call options weakened over the weekend, alleviating pressure on upside skew and butterfly options.
Butterfly option IV rebounded overall after last week's sluggishness; we continue to believe that volatility will rise as BTC challenges or breaks through the $50-70k price range.
Wishing you successful trading this week!
