BTC Volatility Weekly Review (December 23 - 30)

Key Metrics: (December 23, 4 PM -> December 30, 4 PM Hong Kong Time)

• BTC against USD decreased by 1.9% ($95,300 -> $93,500), ETH against USD increased by 3.0% ($3,300 -> $3,400)

• The price movements over the past week were quite volatile, but ultimately remained between $92,500 and $99,000, leading to a contraction in actual volatility (at least the volatility between settlement points). We speculate that this trend will continue in the coming trading days, but there may be fluctuations at the year-end settlement. Meanwhile, this prolonged price adjustment may end before the year is out and prepare for the next round of increases.
• The current support level is as low as $92,000, and we expect good support at the $90,000 level. The next support level will drop all the way to $85,000. If the support at $85,000 is broken, we will see a more substantial decline, but we believe this scenario is highly unlikely. On the upside, if the price successfully regains the psychological level of $100,000, it will open up opportunities to reach our target price level of $115,000 - $120,000 (expected in the early to mid-first quarter).

Market Themes:

• During a very quiet holiday week, prices slightly consolidated under the influence of a more hawkish Federal Reserve meeting, while the U.S. stock market underwent a downward adjustment and the dollar (against other fiat currencies) rose.
• The momentum in the cryptocurrency market has begun to shift downward. The market is undoubtedly in a bullish position, yet it is difficult to find signs of buyers. Rumors suggest that MSTR will enter a quiet period before its January earnings report, which also reduces the pressure for BTC prices to rise in the coming weeks.

BTC ATM Implied Volatility:

BTC ATM Implied Volatility (December 23, 4 PM -> December 30, 4 PM Hong Kong Time)

• Despite some localized volatility in prices, as the price finds balance within the range of $92,000 to $99,000, the overall level of actual volatility continues to decline. However, the implied volatility for expirations in February and beyond remains stubbornly high, as the market is still digesting the significant demand from earlier this month.
• We expect implied volatility to decrease more reasonably in January. The current market pricing for first-quarter implied volatility averages over 60 points weekly, which historically is difficult to sustain. Although with the market readjusting positions at the start of the new year, and Trump set to announce his inauguration on the 20th, we expect to see an increase in volatility in January. However, BTC assets themselves are becoming more stable and receiving considerable support from ETF inflows. Therefore, we believe sustainable actual volatility will be in the range of 40-50 (rather than the current pricing exceeding 60 points for February/March and beyond).

BTC Skew/Kurtosis:

• Despite implied volatility remaining unchanged at low price levels, while actual volatility below is also quite high, skew has still shown an upward trend this week. The market continues to seek upward opportunities for 2025 and takes advantage of the current lower prices. Meanwhile, the significant buying flow earlier this month has created shorts in the middle of the curve.
• As the correlation between price and skew has been disrupted, kurtosis has declined unilaterally. Meanwhile, demand for the lower wing in the mid to long term remains absent (only some short-term strategic buyers are present to prevent prices from crashing below $90,000).

This concludes the report for 2024! Thank you for reading, and Happy New Year!