SignalPlus Volatility Column (20241008): Healthy Pullback

The U.S. Supreme Court rejected Battle Born Investment's claim to ownership of $4.4 billion worth of Bitcoin, allowing the U.S. government to continue selling this batch of seized digital assets from the Silk Road market. The negative sentiment from this news and the geopolitical tensions offset the market's optimism, causing the price of Bitcoin to dip 2% intraday, challenging the $62k support level, and leading to a surge in actual volatility.

Despite this, some analysts believe this market movement may represent a healthy pullback for BTC. The risk-averse sentiment displayed by investors at high levels allowed the price to temporarily retreat to the support range above $60k, reducing the likelihood of a sudden drop in the future. Overall optimism has shifted back to neutral, and the implied volatility levels have been significantly revised downwards, with the front end of the curve unusually flat, smoothing out the uncertainty that was supposed to arise from the CPI on October 11, providing traders who are optimistic about economic event volatility with opportunities to establish short-term calendar spreads.