Key Indicators: (January 20, 4 PM -> January 27, 4 PM Hong Kong Time)

• BTC against USD fell by 7.9% (from $107.3k to $98.8k), ETH against USD fell by 9.2% (from $3.38k to $3.07k)

• The price of BTC against USD surged before Trump's inauguration, but after a week of significant volatility, it remained relatively unchanged by Friday's close. Following a calm weekend, there was intense selling on Monday morning, seemingly related to the sluggish performance of U.S. tech stocks. Ultimately, the coin price tested the support range of $98k-$100k. If this support level is breached, we may see a larger deviation in a corrective trend, which has dominated from mid-December to mid-January.

• Our fundamental judgment is that the support level of $98k is sufficient to support a significant price increase in the coming weeks, so we maintain a bullish outlook. However, if the price is dragged back into the $92k-$98k volatility range, we will need to reassess.

Market Themes

• This week, all focus was on Trump's inauguration and the subsequent executive orders. Overall, there were no surprises in these orders, with the only significant surprise being the easing of tariff positions (especially towards China), which partially eliminated the previously unanimous bullish outlook on the dollar against G10 currencies and the yuan. Against the backdrop of the "America First" policy, U.S. stocks continued to rise. The cryptocurrency market, however, appeared overly enthusiastic before the announcement of the orders, despite some mid-term positive news regarding the development of cryptocurrencies for U.S. government reserves. Ultimately, we failed to break through historical highs and instead fell back into the volatility range.

• During the weekend before the Chinese Lunar New Year, we were fortunate to witness DeepSeek's R1 model (and ByteDance's Doubao 1.5), which further highlighted the ongoing AI arms race and led to massive liquidations in U.S. tech/AI stocks, with Nvidia (NVDA) dropping over 15% at one point yesterday. Whether this situation will continue to cause a decline in U.S. stock valuations remains to be seen—but it is undoubtedly a "painful trade" for many traditional financial funds, as there is a consensus on the arrival of the "Trump era." This clearly demonstrates that there is still a close correlation between cryptocurrencies and U.S. stocks. During the Asian early trading session, when liquidity was low, Bitcoin and Ethereum fell over 6%, but later recovered some losses.

BTC Implied Volatility

• In terms of implied volatility, the uncertainty surrounding the inauguration event initially dominated. The implied volatility on the day covering Trump's speech peaked at 140 points. However, after cryptocurrencies were not mentioned in the inauguration speech, the front end quickly fell back. Nevertheless, there remains a risk premium for uncertainty regarding subsequent executive orders in the term structure, particularly keeping the expirations on January 31 and early February elevated. On Thursday, rumors circulated that cryptocurrency regulations would be signed later that day, causing both prices and volatility to surge, but this was short-lived. Although some constructive regulations were indeed issued, enthusiasm waned as prices failed to break through $106k, leading to a stabilization of the price volatility range over the weekend and a continued decline in implied volatility as bullish volatility positions prepared for the event were gradually unwound. Subsequently, the price drop on Monday, driven by DeepSeek news, pushed implied volatility higher again.

• Overall, the volatility of short-term expirations was quite dramatic this week, with the implied volatility for the January 31 expiration fluctuating from 76 to 58 to 65 to 50 to 63. In the longer-term structure, implied volatility declined more smoothly as the tail uncertainty of immediate U.S. savings policy has dissipated. However, reasonable two-way trading at slightly lower implied volatility levels has limited the collapse of implied volatility.

• It is worth noting that aside from the spike before last Monday's inauguration, actual volatility has been gradually declining throughout the week. Despite some breaking news and localized volatility, high-frequency and hourly actual volatility remained locked in just above the 40 level. Even considering the significant fluctuations on Monday, this trend persisted. Therefore, we reasonably speculate that the current actual volatility will be in the range of 40-50, and the current implied volatility levels of 55-60 observed on the surface may be adjusted down by 5-7 points.

BTC Skew/Kurtosis

• This week, skew remained relatively quiet. Although the market lacks a substantial breakthrough at the top, most players still believe that the cryptocurrency executive orders are sentimentally bullish. Therefore, theoretically, as the U.S. regulatory environment thaws, allowing more funds to flow into the cryptocurrency space, the market will continue to see upward momentum during pullbacks. The only exception was the sharp bearish reversal in short-term skew on Monday morning due to the repricing of U.S. stocks.

• Aside from the short-term expirations related to the inauguration, kurtosis remained relatively flat in the longer term. In the short term, players mainly traded bullish spreads or bullish butterflies above the price, exerting selling pressure on the market's kurtosis. However, considering the high volatility of actual volatility and our localized volatility range between $90k-$110k, we believe it is worthwhile to hold positions within the range of strike prices while simultaneously holding positions outside the bullish range. Short-term kurtosis significantly increased when spot prices fell on Monday, mainly due to the market purchasing cheaper lower strike prices to protect structural cash long positions.

Wishing everyone good luck this week and a pleasant holiday!

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