Key metrics: (5May 4pm HK -> 12May 4pm HK):

  • BTC/USD +10.7% ($94,700-> $104,800) , ETH/USD +39.2% ($1,825 -> $2,540)

  • The market decided to test the $99–100k resistance level with intent and they successfully cleared it, taking us up into the higher trading range channel of $101–110k with surprisingly little standing in the way. Overall the absolute move on the week was reasonably impressive in terms of range (+10.7%), but the realised volatility remained in the lower end of the distribution with very orderly price action on move higher, due to decent spot selling from profit takers and long gamma related hedging

  • The move off the $74–75k lows has been impressive — rallying 40% in less than a month — and has solidified our view that we have moved into the final progression that completes the move that began in September last year. From here we expect some consolidation between $106–92k over the coming few weeks, with a small risk of further testing an extension of the local highs. We continue to be structurally bullish BTC and are targeting $115–125k over the coming months/quarter(s), which we think will represent the secular high for the time being. From a technical standpoint, given this initial move has proved more extended than expected, there is a chance that the highs come in closer to $130–135k now

Market Themes

  • Fairly quiet week once again cross markets as the market looked past comments from the Fed about ‘not rushing to cut’, with 2–3 cuts still being priced in for the next year. The dominant narrative continues to be the unwind of Trump’s trade war, particularly with regards to China, with a rollback of the tariff rate (reduction of 115%) announced Monday to conclude of a week of progressive talks. Meanwhile other trade deals are in the pipeline, with the US-UK announcing one end of last week. The market has now fully unwound the equity sell-off on the back of tariff fears, and has actually unwound some of the more ‘justified’ repricing lower on the basis of the US economic slowdown, with SPX back to almost flat on the year already.

  • As for crypto, the bullish equity sentiment and the clean break above $100k for BTC was enough to catalyse the Altcoin market back to life, with Ethereum in particular showing true Altcoin characteristics as it exploded almost 40% higher on the week, clearly liquidating a lot of structural shorts along the way. ETF inflows in ETH remained subdued but healthy in BTC, so while there will be a lot of ‘FOMO’ around this altcoin rally, ultimately the big-picture narrative of BTC dominance hasn’t changed materially, and this feels more of a short-term position cleanup

BTC$ ATM implied vols

  • Implied vols struggled to rally last week despite spot breaking cleanly through $100k and testing up to a high of just shy of $106k. Ultimately realised volatility remained extremely subdued, with 1w high frequency realised clocking in around 37 last week despite the large range move. Appetite for optionality from market participants remained minimal, with tactical call-spread buyers the only real source of buying seen. Meanwhile overlay selling both sides of spot continued to pick up as the market took advantage of the higher spot level to reduce delta via covered calls, while some participants also sold puts on the trend move higher to collect yield

  • From here, barring a big range-break or a catalyst, we could expect consolidation in spot and further pressure on implied volatility, with the market seemingly fairly long vol already from overlay supply. The roll down on the term structure is punitively steep, with June and July volatility levels rolling down 1–1.5vols/week on a static basis, meaning holding optionality in this environment even on a longer dated basis is very challenging (despite the low implied levels in absolute terms)

BTC$ Skew/Convexity

  • Skew prices attempted to move for sharply calls as we first broke through $100k, with the market worried about an explosive move through the key resistance level of $99–100k. However, with plenty of supply in spot and perps from profit taking and overlay gamma, the move was very orderly and this encouraged more overlay call selling, putting further pressure on call skew. Eventually as spot began to reverse course lower these skew prices ended up flat/lower on the week

  • Convexity remained broadly offered as overlay supply of options either side of spot continued, while any directional bets were put on through call-spreads, net supplying more fly to the market. With this $94–106k seemingly a fairly low realised vol zone for spot (back in February and also past 2 weeks), we think that strikes outside the range will be worth owning once more, while local strikes can continue to underperform should be see further consolidation in price, therefore from a pure relative value perspective we think these convexity levels are too low

Good luck for the week ahead!