BTC Vol — Week in Review 27Oct — 3Nov

Key metrics: (27Oct 4pm HK -> 3Nov 4pm HK)

Market continues to chop in the $104/105-$115/116k range here with realised volatility remaining elevated even as the absolute ranges compress — this suggests market is struggling to find an equilibrium here, perplexed by the disconnect between Crypto vs Tech/high beta Single Stocks and worried about the possibility of Gold/precious having a more material correction lower from here. Technically we expect another leg lower from here to give a completion of this flat corrective leg (first of a potential 3-legged flat multi-month (year?) correction) but we could see the range chopping back and forth for a few more sessions / weeks ahead

Focus on FOMC, US earnings and Trump-Xi this past week. Ultimately all three events helped to keep the risk supportive backdrop in tact: the Fed delivered the anticipated/needed 25bp cut and while Powell attempted to walk back pricing of a Dec cut (‘by no means a foregone conclusion’), this proved to be merely a blip; US earnings were broadly very solid despite fears of slowdown in the ‘real economy’; and Trump-Xi finally had a breakthrough with tariff rates lowered and some concessions made as the path to a deal looks almost certain now
Despite all this, Crypto once again struggled for footing, as OG whales continue to unload their holdings with both BTC and ETH struggling for momentum above $115k and $4k respectively. With SPX/NASDAQ and high-beta AI stocks continuing to make new highs, the opportunity cost of holding crypto continues to be punitive, and the USD-leg of the equation has also had a relief rally with Gold pulling back below $4000 and the USD rallying broadly against G10 FX as the pricing for a Dec 25bp rate cut moved from 90% to almost 50% at one point. The NAV of many of these DAT companies has compressed to (or below) 1.0x as well as that story loses momentum

Implied vols broadly traded sideways this week as realised volatility remained in the low 40s (on a high frequency basis), justifying this newer implied vol base that we have reset to. Having said that, a lot of this realised volatility was driven by the reaction to events last week (FOMC then Trump-Xi meeting), and on a lower frequency basis the realised volatility has been dampening down as we compress in a tighter $106–112k range broadly. This led to some short-term pressure on gamma tenors into the weekend though this was undone with Monday’s move back to $107k as the orderbook liquidity still remains thinner than before
The term structure of implied vols has remained broadly unchanged with some steepness justified by the macro dynamics, as November is broadly a quiet month on the US data front (with no FOMC either), though December is shaping up to be an action packed end to the year

Skew prices broadly moved deeper for puts last week as realised volatility on the topside remained muted with plenty of offers found between $112–116k, while downside moves continue to exhibit high realised volatility. The market seems to have some quite sharp derive below $106k that saw risks briefly plunge to very deep levels on Thursday, though ultimately it is hard to sustain those unless we see a material break of the range
Convexity prices moved lower as spot began to establish a broad $106–112k range last week, with liquidity well supported both sides of this range (i.e. no explosive moves seen as we approached the extremes). Directional plays continue to be expressed through put spreads or call spreads which also net supply some convexity to the market. Vol of vol remains locally a bit high but not as extreme as in the past few weeks and this is also helping keep a dampener on implied convexity pricing for now

Good luck for the week ahead!

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