BTC Volatility Weekly Review (January 27 - February 3)
Key Indicators: (January 27, 4 PM - February 3, 4 PM Hong Kong Time)
- BTC against USD fell by 3.8% ($98.8K -> $95.1K), ETH against USD fell by 16.0% ($3.07K -> $2.58K)
BTC against USD Spot Technical Indicators Overview:
BTC against USD successfully rebounded from our marked key support level of $98K early last week, attempting several times to test $106K in the following week, but ultimately failed to gain enough momentum to form a new upward trend. By the weekend, due to Trump's tariff news and the market holding weak long positions above $102K, a strong liquidation was triggered, causing the price to drop below $98K, subsequently extending downwards and briefly falling to $91K.
At this point, the short-term judgment is quite tricky. If the price drops below $90K, it would invalidate the previous 4th wave upward (as illustrated) and raise questions about our longer-term trajectory timeline for the spot market. A larger support level would be between $89K-$86K, and if broken, it would expose us to support levels of $75K or even lower.
Market Themes:
For most of last week, the market seemed to have digested the impact of DeepSeek's release of the R1 model. Although necessary adjustments did occur in stocks like NVDA, overall, US tech/AI stocks gradually regained lost ground this week, partly due to Powell's slightly dovish statement at the FOMC meeting on Wednesday. However, the market began to stir again over the weekend as Trump fulfilled his promise to increase tariffs on Mexico, Canada, and China, breaking the hopes of some that the recent easing rhetoric might lead to a pause in tariff hikes.
Moving forward, the key narrative in the market may be how to respond to this global trade war. There remains considerable divergence in the market, with some players believing that the market's "expectation" of increased tariffs means the reaction will only be short-lived. Others emphasize that the Trump administration is seriously considering withdrawing from global affairs, potentially retaliating with higher tariffs. Given this divergence, it seems we are about to enter a period of localized turmoil until the market regains balance and prices this risk appropriately.
As digital currencies were the only tradable assets when the tariff news was released over the weekend, the Bitcoin market faced immense pressure, dropping to $96K before the traditional financial markets opened on Monday. With the heavy pressure after the opening of traditional finance, the cryptocurrency market triggered another round of liquidation, with Bitcoin plummeting to $91K. Meanwhile, Ethereum once again demonstrated its "small coin" characteristics, plummeting nearly 20% after breaking the key $3K support level, dipping as low as $2.5K.
BTC Implied Volatility
Despite a series of fluctuations surrounding US stocks (due to the revaluation of AI stocks after DeepSeek's release) and the Fed's comments midweek, Bitcoin's actual volatility remained low this week, fluctuating around 40-45, while implied volatility peaked at over 50 early in the week. Part of the reason may be that Wednesday to Friday is the Chinese New Year (leading to reduced volatility in the Asian time zone), with the price maintaining a comfortable range of $98K-$106K for most of the week, naturally suppressing actual volatility. However, the weekend's tariff news triggered a sharp price breakout and a round of liquidation, pushing both actual and implied volatility higher. The implied volatility for the February 7 expiration briefly rose from a low of 42 to 71 over the weekend, then fell back to around 65.
At the far end of the curve, implied volatility has generally continued to decline. Due to the persistent lack of momentum for spot prices to push above $105K, bets on price direction have been withdrawn, and we have seen a significant amount of liquidation above the March expiration date in the market. Additionally, since the Trump administration's task force is likely to push for a savings plan for cryptocurrencies no earlier than the second half of this year, the tail risk of explosive price growth in the short term has been eliminated. Nevertheless, the implied volatility at these longer-term maturities was still pulled higher by the increase in actual volatility on Monday, also preparing for localized price turbulence following the onset of the trade war in the macro context.
BTC Kurtosis / Skewness
As spot prices were threatened and broke through the local support level of $98K-$100K, triggering liquidations and causing high actual volatility, the short-term skewness sharply tilted downwards over the weekend. However, after the short-term positions were liquidated and the spot price rebounded to $94K, the skewness quickly recovered from its low point. In the far end of the term structure, although implied volatility did increase as prices fell, the skewness remained relatively stable.
The kurtosis price remained quite stable in the short-term. In the short term, due to the demand for the downside wing after the price breakout, the kurtosis surged sharply in a short time.
Wishing everyone good trading luck this week/month!
