BTC Volatility Weekly Review (October 27 - November 3)

Core Indicators (October 27, 16:00 HKT – November 3, 16:00 HKT) BTC/USD fell 7.3% (from $115,600 to $107,200) ETH/USD fell 12.1% (from $4,200 to $3,690)

The market continues to oscillate in the range of $104k/105k to $115k/116k. Although the absolute volatility has narrowed, the actual volatility remains high — this indicates that the market is struggling to find a balance, feeling confused by the disconnect between cryptocurrency and the performance of tech stocks/high beta individual stocks, and concerned that gold/precious metals may experience a more substantial correction. From a technical perspective, we expect the market to begin another wave of decline to complete the current flat adjustment wave (this could be the first segment of a potential three-part flat adjustment lasting several months (or years?)), but we may also see the market continue to oscillate within the range in the coming weeks. Market Theme In the past week, market focus has been on the FOMC meeting, U.S. earnings reports, and the Trump meeting. From the outcomes, these three events have maintained the broader environment of risk appetite: the Federal Reserve cut interest rates by 25 basis points as expected/needed, although Powell attempted to downplay expectations for a rate cut in December (“not a done deal”), this was just a minor episode and did not significantly impact market expectations; despite concerns about a slowdown in the “real economy,” U.S. corporate earnings reports have been generally robust; and the Trump meeting ultimately achieved a breakthrough, with tariff rates being lowered and some concessions made, making an agreement now almost certain. Nevertheless, cryptocurrencies again struggled to gain a foothold, with original “whales” continuing to sell off their holdings, causing BTC and ETH to have difficulty staying above $115,000 and $4,000, respectively. As the S&P 500/Nasdaq indices and high-beta AI stocks continue to reach new highs, the opportunity cost of holding cryptocurrencies remains high. At the same time, as gold fell below $4,000, there was a relief rebound in the dollar, with market expectations for a 25 basis point rate cut in December dropping from 90% to nearly 50%, and the dollar strengthening against G10 currencies. Many DAT companies' net asset values have also compressed to (or below) 1.0 times, and this narrative has lost its appeal. BTC implied volatility

This week, implied volatility generally consolidated sideways, while actual volatility remained in the low 40s (hourly high frequency), confirming the correctness of the implied volatility resetting to this level. That said, most of the actual volatility was driven by last week's reactions to events (FOMC meeting and Trump meeting), and on a lower frequency basis, as the price of the coin was suppressed to a narrower range of $106–112k, actual volatility has been weakening. This brought some selling pressure to the short-term Gamma expiration before the weekend, but as prices returned to $107k on Monday, the selling pressure quickly disappeared, as market liquidity is still thinner than before. The term structure of implied volatility has largely remained unchanged, with steepness supported by macro dynamics, as November's U.S. data is generally sparse (and there is no FOMC meeting), while December is gradually becoming a busy month for events as the year comes to a close. BTC/USD Skewness/Kurtosis

Last week, the skew of put options generally deepened, as the actual volatility on the upside remained sluggish, with a large amount of selling pressure in the $112–116k range, while the downward volatility continued to show relatively high actual volatility. The market seems to have a significant amount of risk below $106k, causing the skew to plummet to very deep levels on Thursday. However, unless we see a substantial breakthrough in the price range, it is difficult for such deep levels to sustain. As the spot activity range gradually locked in at $106–112k last week, the kurtosis price continued to decline, with good liquidity support on both sides of the range (i.e., when the price approaches the edge of the range, the cryptocurrency price does not show extreme movements). There are still a large number of put/call spread trades building directional risk exposure, which also provides selling pressure for the kurtosis. The volatility of volatility remains slightly higher in a localized range, but not as extreme as in the past few weeks, which also helps to temporarily suppress the kurtosis. Wishing you a successful trading week ahead!