Key metrics: (17Feb 4pm HK -> 24Feb 4pm HK):
· BTC/USD -0.3% ($96,150 -> $95,900) , ETH/USD +1.3% ($2,690-> $2,725)
BTC/USD Spot Technical Outlook:
· After another week of low realised volatility, the spot market managed to chew through some offers at the top of the trading channel and on Friday began a test of the $99–100k resistance level, before the Bybit hack news triggered a large liquidation, as folks likely pulled out collateral from Bybit and this selling flow triggered stops. The market tested and held key support around the $95k level on Friday night and has since been grinding back to the upper end of the prior trading channel
· From here, the next couple of trading sessions will determine whether the market is content on reverting back into the prior trading channel to form a new consolidation pattern. If not, and we manage to pull back above the prior trading channel, then it’s likely we will see a more material expansion back higher and witness another test of the $100k level. On the downside if the key support at $95k fails to hold, then we would likely initially test the $93k level and then $90–91k below that, where strong support has persisted for quite some time. A failure to hold above that could lead to a more protracted correction lower for BTC
Market Theme
· Another very quiet week across macro markets, with steady price action until Friday where weak US growth and sticky inflation expectations brought ‘stagflation’ fears to the surface again, leading to a correction lower in US equities and bond yields also lower in more traditional ‘risk-off’. Overall however the broad backdrop remains steady and short-term positioning adjustments are likely to look and feel outsized in what has been a very low vol environment,
· Crypto markets remained in search of a new narrative, with Altcoins particularly showing weakness. BTC was buoyed mid-week by news of MSTR raising capital to purchase more, with a brief ascent towards the key $100k level on Friday. However, news of $1.5bio ETH being hacked from Bybit on Friday night roiled the markets, with ETH pulling back 6% and BTC ending up back at $95k into the weekend, as liquidations on Bybit triggered stop-losses from fresh longs put on this week
BTC$ ATM implied vols:
· Implied volatility levels were heavy this week, particularly in Feb-March expiries, as the combined burden of theta and vol rolldown on steep curves led to capitulation of long vol positioning. Realised volatility has been clocking close to 30vols consistently, putting pressure on daily volatility levels down to around 35–36vols, as low as we have seen since October last year pre-election. While we remained entrenched in this $94–99k range we would not expect local realised volatility to pick up materially and this should keep downward pressure on shorter dated implied levels
· In terms of ATM term structure, the market may look to harvest premium further out the curves in a more gamma neutral fashion, though we expect some term premium to remain in the curve, and as such would expect further steepening first before the market capitulates on inventory in June expiries onwards
BTC$ Skew/Convexity:
· Skew prices moved aggressively for puts in gamma expiries on the back of the Bybit hack news, though ultimately Bitcoin exhibited limited beta to the move and as such we would expect skew prices to struggle to sustain these levels for downside. Further out the curves skew prices remain pretty statically bid for topside given the tails still seem for the upside on US stockpiling/de-regulation
· Convexity was fairly muted outside of gamma tenors, where short dated wing premium briefly picked up over the Bybit news, but once again this was short-lived
Good luck for the week ahead!
