Key Metrics (February 3 - 10, 4 PM Hong Kong Time)

• BTC against USD rose by 2.5% ($95.1K -> $97.5K), ETH against USD rose by 2.3% ($2.58K -> $2.75K).

• The drop triggered by liquidation last Monday (to $91K) was quickly reversed, initially pushed up to $102K, followed by a somewhat monotonous one-sided wedge pattern, leading to a compression of actual volatility. As the short-term price range continues to tighten, we may see a price turning point in the upcoming trading sessions. Below the current price level, there is strong support from $96K down to $93K, with further major support in the range of $91K-$89K. Considering last week's liquidation, the current market positions may be clearer. Above the price, the resistance at $100K was strongly rejected after last Friday's non-farm payroll data release, with higher resistance at $102K. A breakout above this level would show a clear upward trend on the technical chart until we revisit the major top resistance between $108K-$110K and the historical peak.
• Due to the lack of clear breakout momentum in the market, the sideways movement of the coin price may extend. In the next 2-3 weeks, if the price correction that started in December (or the price correction of the pre-inauguration rise) continues, this trend will become more apparent. Long-term, we still expect prices to rise significantly above $120K, but if the support at $89K is broken, the price correction trend may continue to expand downward. It is important to note that breaking this level does not negate the view that the coin price can continue to rise (but dropping to $60K-$65K would).

Market Themes

• The market's panic over the global trade war peaked last Monday. However, after constructive talks with leaders from Mexico and Canada, Trump decided to delay the announcement of tariff decisions less than 24 hours later, quickly alleviating market concerns. Although tariffs on China have already taken effect, the market had anticipated this. The situation may still change after the next conversation between Trump and President Xi Jinping.
• Risk assets gradually recovered this week, with the S&P 500 regaining 6,000 points. Although the non-farm payroll data fell short of expectations, it aligned more with private discussions, and both interest rates and stocks reacted quite calmly. Overall, the macro backdrop still supports risk assets, despite tail risks from escalating trade wars and geopolitical turmoil.
• After Trump's cryptocurrency advisor, Sax, announced a press conference on Tuesday to "outline the government's plans for digital assets," cryptocurrencies quickly shifted focus from the liquidation on Monday (with Bitcoin dropping to $90K and Ethereum hitting an astonishing low of $2,100) and surged to $102K in anticipation of hearing a specific timeline for the U.S. digital reserve. However, the market ultimately ended in disappointment, as the related timeline was postponed (within 170 days), causing Bitcoin prices to retreat to the range of $95K-$98K for the remainder of the week. It seems that catalysts related to the Trump administration will only take effect in the second quarter.

BTC ATM Implied Volatility

• After the price drop caused by Monday's liquidation quickly faded, the price returned to a clearer range of $95K-$100K. The market began to clear structural long positions prepared for the first quarter after the 2024 election, leading to a significant decrease in implied volatility. The last glimmer of hope was Sax's press conference on February 5, which caused short-term implied volatility to oscillate higher in anticipation of actual news about reserve inventory. However, aside from further delaying the timeline, there was nothing noteworthy from this meeting, leading the market to further clear first-quarter positions and suppress implied volatility. Last week, both high-frequency and daily actual volatility were locked in at levels above 50, largely due to the price reversal on Monday and the subsequent press conference causing excessive elevation.
• A noteworthy phenomenon is the steepening of the term structure, as the market pushes back the timeline for catalysts related to the Trump administration. With expectations that Sax will not provide substantial results in the next 90-180 days, the market continues to clear positions expiring in February and March, while positions for June and beyond remain. At the same time, a very large April/December calendar spread trade (selling April, buying December) was observed, further steepening the term structure.

BTC Skew/Kurtosis:

• The skew for short-term expirations continues to decline as the market remains cautious about trade war/tariff-related risks in case of cryptocurrency volatility declines. On the other hand, the market seems completely unconcerned about the tail risks above in the short term, continuously clearing bullish/bullish spread positions and further suppressing short-term skew. For expirations in June and beyond, skew remains at a high level, as the structural sentiment still appears bullish.
• Aside from short-term expirations, kurtosis is quite flat. The continued compression of cryptocurrency volatility confirms that the market has no interest in strike prices within the $95K-$100K range, while the market is very cautious about strike prices outside this range, especially given the currently relatively low implied volatility, as actual and implied volatility could quickly rise due to price breakthroughs in either direction.

Wishing everyone good luck this week/month!