Key metrics: (10Mar 4pm HK -> 17Mar 4pm HK):

  • BTC/USD +1.5% ($82,300-> $83,500) , ETH/USD -8.2% ($2,070-> $1,900)

  • BTCUSD spot remained heavy over the last week but we have finally begun to see normalisation lower in realised volatility as we settle into the $80-85k range. It’s worth noting we made a fresh local low last leek which leaves us waiting and watching the price action for the next few days to obtain clues as to direction of the next major move in spot. Given the extended period of higher volatility we have just been through, we think we could be in for a few sessions of continued consolidation and expect support at $78-80k and resistance initially at $85-86k and above at $89.5-92k to guide the price action for the next week or so

  • A break below $73k could see a more dramatic return to higher volatility, whereas a break above $92k would see us retesting more meaningful long-term resistance at $98-100k. We remain medium term bullish on BTC but will be looking for more confirmation to the end of this corrective period before engaging

Market Themes

  • Another volatile week across markets as SPX made fresh cycle lows amidst continued rebalancing and degrossing from equity long-short funds, with rumours of multi-sigma drawdowns reported. On the narrative front, nothing fresh really catalysed this, with the market becoming increasingly desensitised to the back-and-forth on tariffs; it was ultimately an overdue correction and de-leveraging in a market that has been very comfortably grinding along for years now. It feels that structurally volatility is creeping back into this cycle, with VIX unlikely to sustain as in the low-teens in the coming months, though of course we will have periods of calm and consolidation along the way

  • As for crypto, the market continued to clean out residual positioning with more than a few looks below $80k in BTC last week, while ETH finally cracked below the key $2,000 support and hasn’t been able to reclaim upward momentum since. Intra-week Bitcoin spot traded with a high local index to SPX/QQQ Indices, remaining heavy in NY sessions as the rebalancing went through before finding some footing in Asia. However with positioning now clearly a lot cleaner across the board we would not expect such a high local correlation to continue, and we would need a material move lower in SPX to plunge through fresh lows in BTC

BTC$ ATM implied vols:

  • Implied volatility levels finished the week fairly lower than Monday’s levels after a brief spike on Monday night as equity vol rallied with SPX turning lower in the NY session. Realised volatility declined over the course of the week in Bitcoin with 1w realised retracing below 50 and into the low-mid 40s for the first time in weeks. The move lower was most pronounced in gamma expiries while further out the curves vols drifted lower with supply of June topside noted as medium term players unwound structural topside plays

  • From here we expect realised volatility to remain fairly subdued as we consolidate/await fresh catalysts. The 4Apr expiry is beginning to pick up some interest with the next round of Tariff announcements from Trump due on 2April, with equity index and FX vol curves pricing a decent premium for this event

  • Skew prices gradually recovered over the course of the week in gamma expiries (from very stretched levels for downside), as liquidations to the downside clearly happened on Sunday/Monday last week, leaving little positioning left to be triggered on pullbacks in spot. Skew prices further out curves remained fairly static as structurally the market remains uninterested in downside plays

  • Convexity broadly ended the week unchanged despite high vol-of-vol as implied levels retraced aggressively from the highs over the course of the week. While we structurally think convexity remains a good own, smile decay for shorter dated expiries can be punitive in locally range-bound markets and therefore we would look to accumulate convexity further out the curves for a change in narrative driving a breach of the $70-105k broad range we have been in since the election

Good luck for the week ahead!