Key metrics: (17Mar 4pm HK -> 24Mar 4pm HK)

  • BTC/USD +4.1% ($83,500-> $86,900) , ETH/USD +8.9% ($1,900-> $2,070)

  • Realised volatility in BTC has finally rolled over this last week, with the market trading between $81.5–87.5k for the week in a rather contained/orderly fashion. Today the market appears to be testing some downward-trend resistance from the end-February highs. A clearance through $87.5–88k would open us up to a re-test of resistance at $91k, above which a break would be confirmed at $93k; if this plays out it should lend momentum to a test of more critical resistance at $100k

  • If instead we reverse lower from here, the market will likely see significant support ahead of $80k and extending down to $77k, with dips being bought into. A break of key support at $73.5k would open us up to a more material correction down to $60–65k and render our current view obsolete, suggesting a much more complex and longer-term dynamic at play. We continue to be medium term bullish and expect a move through $115–125k over the coming months and/or quarters.

Market Themes

  • Significantly calmer week across markets as VIX finally retraced below the psychological 20 level, closing out the week at 19 (from as high as 29 just 2 weeks ago) after Powell walked back any hawkishness in Wednesday’s FOMC meeting and a US government shutdown was once again avoided. Risk assets got a further boost over the weekend with leaks over the 2April tariffs suggesting much more targeted measures, potentially reducing the scope for near-term escalation into a full-blown trade war. While Trump has been unpredictable to some degree over this topic, ultimately a lot of fear/bearishness around trade tariffs has been priced into risk assets at this juncture, therefore short-term there seems to be asymmetry in terms of the reaction function (i.e. good news may be taken more favourably than a continuation of bad news)

  • As for crypto, the market once again had reason to build some excitement/anticipation on Friday ahead of an unplanned address from Trump at last week’s Digital Assets Summit in NYC, though ultimately this turned out to be a damp squib as it was a 5 minute pre-recorded video address. BTC spot briefly tested $87k before retracing down to $83k as risk assets threatened to turn lower into the weekend, before finding its way back to $87k in light of the more favourable tariff news. ETH also squeezed out short positioning, breaking through $2k initially on Thursday and showing signs of a more sustained bounce currently.

BTC$ ATM implied vols

  • Implied volatility levels headed lower of the course of this past week, as realised volatility capitulated with spot finding equilibrium in the $81.5k-87.5k range. High frequency realised dropped down to 40 on a 1w basis, even including FOMC and Trump’s address at DAS, which is approaching the low realised levels of February. Ultimately our long term view remains that BTC realised volatility should trend towards a 30–40 vol regime, though it remains a high vol-of-vol asset so the occasional spike to a 50–60 vol regime will be within the distribution

  • The implied volatility term structure steepened out as front-end contracts led the way lower, driving a weighted move of the whole curve with expiries out to September reaching local lows for the year. The market seems to be extracting premium associated with policy changes, with the narrative on that front stale and Trump showing no particular signs of sensitivity to BTC prices. Moreover, with BTC showing good signs of support ahead of $80k even during more shaky SPX performance last week, the market is also removing some equity-beta vol as the realised correlation wanes and VIX also finds itself back below 20

  • From here we do expect realised volatility to remain fairly subdued as we consolidate/await fresh catalysts into month/quarter-end. The 4Apr expiry may continue to pick up some interest with the next round of Tariff announcements from Trump due on 2April, but once that has been navigated should the macro/risk backdrop continue to look benign as it currently does, we may see the market position for a low realised grind higher during April

BTC$ Skew/Convexity

  • Skew prices continued to recover over the course of the week in gamma expiries (from very stretched levels for downside), with little positioning left to be liquidated on pullbacks lower and BTC spot holding up fairly well even during pullbacks in SPX last week. Further out the curve, supply of downside vol resulted in a slight reprice higher of skew (for calls) in April-September expiries

  • Convexity broadly ended the week lower as implied volatility levels compressed and realised vol-of-vol also waned. The market also saw some 1x2 call-spread ratios from directional players, net supplying vol and convexity to the market, further putting pressure on wings. We expect that convexity levels will find a base here with any break of the $80–90k range likely to trigger a pick-up in realised volatilityGood luck for the week ahead!