Key indicators: (May 5, 4 PM - May 12, 4 PM Hong Kong time)
BTC rose 10.7% against USD (94.7k USD -> 104.8k USD), ETH rose 39.2% against USD (1,825 USD -> 2,540 USD)
The market intentionally tested the resistance level of 99-100k USD and successfully broke through, taking us to 101-110k USD, and unexpectedly encountered little resistance. Overall, while the weekly increase is considerable (10.7%), the actual volatility remains low, as there are sellers from profit-taking and hedging of long gamma positions above the price, with the price movement being very orderly during the rise.
The market has risen nearly 40% from the low of 74-75k USD within a month, which is quite significant. It also confirms that we are entering the final phase of this trend since last September. Currently, we expect the market to range between 92-106k USD in the coming weeks, but there is a possibility of continued local upward extension. We remain bullish on BTC and expect to reach 115-125k USD in the next few months or quarters, this target is our current long-term peak. From a technical perspective, considering that this surge is stronger than expected, there is a chance we could rise to 130-135k USD.
Market themes
Other market activities this week have been very quiet. The market ignored the Fed's comments about 'not rushing to cut rates', still expecting 2-3 rate cuts in the coming year. The main topic of discussion remains Trump's trade war, especially the announcement on Monday to cancel the tariff rate on China (reduced by 115%), ending nearly a week of negotiations. Meanwhile, other trade agreements are gradually being finalized, including the US-UK agreement announced last weekend. The market has completely eliminated the stock sell-off caused by tariffs, and even some of the pricing adjustments due to concerns about a slowdown in the US economy have been erased, with the S&P index nearly back to the beginning of the year levels.
Returning to cryptocurrencies, the bullish sentiment in US stocks combined with Bitcoin fully breaking through 100k USD is enough to revive the altcoin market. Particularly, Ethereum has shown clear altcoin characteristics, surging nearly 40% throughout the week, liquidating a significant number of structural short positions. There haven't been many ETF trades on Ethereum; instead, Bitcoin has seen robust inflows. Thus, although this altcoin rally has caused a lot of panic, the overarching environment dominated by Bitcoin has not changed substantially, and the fluctuations in altcoins seem more like a short-term liquidation.
BTC implied volatility
Despite the fact that the coin price fully broke through 100k USD and approached 106k USD last week, the implied volatility has struggled to rise. Overall, the actual volatility is quite mild, despite the large overall fluctuations; the high-frequency actual volatility for the entire week was only around 37. The buying demand from speculative players is minimal, and tactical call spreads are the only volatility buyers. At the same time, there is continuous selling pressure on both wings, as the market reduces delta exposure through covered calls at high coin prices, while some players accumulate profits by selling put options.
Currently, unless there is a significant breakout or a notable catalyst, we expect the coin price to further stabilize and continue to compress implied volatility. The market seems to have accumulated a large number of longs due to continued selling pressure, and the term structure has become very steep, with implied volatility for June and July rolling down at a speed of around 1-1.5 points per week, meaning that even holding long positions in this environment is quite challenging (though it must be acknowledged that the absolute level of implied volatility is still low).
BTC skew/kurtosis
The skew price was extremely biased upwards when it first broke through 100k USD this week, as the market feared that the coin price would explosively break through the key resistance level of 99-100k USD. However, it was later discovered that there was a significant amount of spot and perpetual selling due to profit-taking and long gamma, and the price movements were actually very orderly. This encouraged more players to sell call options, causing the skew to pull back from its upward bias. Ultimately, as the price corrected lower, the skew ended the week relatively stable.
Kurtosis has been continuously suppressed due to selling pressure on both wings. Directional trading is mainly conducted through call spreads, resulting in a net sale of kurtosis in the market. Considering that 94-106k USD appears to be a low volatility range (returning to positions from February and two weeks ago), we again believe it is worthwhile to hold out-of-range strike prices, while local prices should continue to decline due to the stabilization of the coin price. Therefore, from a relative price perspective, we believe that kurtosis prices are still too low.
Wishing everyone good luck this week!
