Key Indicators: (June 2nd 4 PM -> June 9th 4 PM Hong Kong Time)
BTC against USD rose 0.2% (105.4->105.65 thousand USD), ETH against USD fell 0.6% (2,510 -> 2,495 USD)
Last week, the market explored the support level of 99-101 thousand USD but quickly rebounded to the 105-106 thousand USD range, strongly suggesting that the price will soon attempt to break through to a new high. If this breakthrough fails, the time of this rally may be further extended, and we might return to the 90-95 thousand USD range. Otherwise, we expect this price breakthrough to lead us towards the anticipated 125 thousand USD target, and simultaneously, the actual volatility will rebound from its current low as the price reaches new highs.
Market Themes
At the beginning of the last month of the second quarter, the market trend is basically consistent with the end of May. Cross-asset volatility continues to decline, and risk assets are gradually rising. Although the SPX wavered before the 6 thousand USD psychological level after Trump and Musk publicly clashed late last Thursday, it finally broke through the next day driven by better-than-expected employment data. In the past nine weeks, the VIX panic index dropped from 45.3 to 16.8, the largest 9-week decline in history (63%, even exceeding the 58.5% drop from 65.5 to 27.5 during COVID from March to May 2023). Overall, macro and fundamental factors remain favorable for short-term risk asset growth, and the market has adapted to occasional tariff comments from the Trump administration. However, considering the current return to normal low volatility levels, we expect market volatility to increase in the short term as the July tariff deadline approaches.
After reaching a historical high last week, Bitcoin continued to correct downwards, including the Trump-Elon news triggering a hit on the critical 100-101 thousand USD support level, but the price quickly stabilized and returned to 105 thousand USD within 24 hours from the low of 100.4 thousand USD. Finally, the price returned to a position slightly above the 100-110 thousand USD range. We have lingered here multiple times since the election ended.
BTC Implied Volatility
Actual volatility hovered near the bottom last week, failing to rise from the level just over 30 when the price dropped to 100 thousand USD (with the price subsequently rebounding); the market's reaction to non-farm data was also very mild, providing no boost to actual volatility. As the price returns to the 100-110 thousand USD range, implied volatility across all terms will continue to be suppressed. Demand for options becomes scarce with the arrival of summer vacation, and the market still holds a large number of long volatility positions, supporting by selling short-term expiration dates, but considering the remaining time this month, the front-end value has now become very low.
The volatility term structure is becoming flatter. Considering the lack of buyers and continuous selling pressure, the market is gradually losing patience with holding forward positions. Now it seems that the rolling decline of the term structure is not as scary, and considering the currently low actual volatility, any range breakthrough could lead to a rapid increase in implied volatility along with actual volatility - we believe forward-term positions are beginning to become worth holding.
BTC Skew/Kurtosis
Skew remained basically flat last week, with the market showing no interest in buying below even when the price dropped near 100 thousand USD. This resulted in skew being biased upwards across the entire term structure.
Kurtosis was overall stable last week. Interestingly, despite the decline in at-the-money implied volatility, forward kurtosis increased. Because considering the volatility of Bitcoin asset volatility, the market is reluctant to reduce tail pricing, but the at-the-money part gradually declines due to the stable price in the 100-110 thousand USD range. We believe this pricing is reasonable overall and continue to recommend holding kurtosis over shorter terms to protect volatility increases during price breakouts.
Good luck this week!
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