Key Indicators (February 3rd - 10th, 4 PM Hong Kong Time)

• BTC against USD rose by 2.5% (from $95,100 to $97,500), and ETH against USD rose by 2.3% (from $2,580 to $2,750).

• The drop triggered by liquidation last Monday (to $91,000) was quickly reversed, initially pushed up to $102,000 by a short squeeze, followed by a somewhat monotonous and boring one-sided wedge pattern, leading to a compression of actual volatility. As the short-term price range continues to tighten, we may see a price turning point in the upcoming trading sessions. Below the current price level, there is strong support from $96,000 down to $93,000, with further major support in the $91,000-$89,000 range. Considering last week's liquidation, the current market positions may be clearer. Above the price, the resistance level at $100,000 was strongly rejected after the non-farm payroll data was released last Friday, with higher resistance at $102,000. If the price breaks through this level, a clear upward trend will be visible on the technical charts until we re-test the major top resistance level between $108,000 and $110,000, as well as the historical high.

• Due to the lack of clear breakout momentum in the market, the sideways movement of the coin price may extend. In the next 2-3 weeks, if the price correction that started in December (or the price correction against the pre-inauguration surge) continues, this trend will become more apparent. In the long term, we still expect the price to rise significantly above $120,000, but if the support level at $89,000 is broken, the price correction trend may continue to expand downward. It is important to note that breaking this level does not negate the view that the coin price will continue to rise (but dropping to $60,000-$65,000 would).

Market Themes

• The market's panic over the global trade war peaked last Monday. However, after constructive talks with leaders from Mexico and Canada, Trump decided to delay the announcement of tariff decisions less than 24 hours later, quickly alleviating market concerns. Although tariffs on China have already taken effect, the market had anticipated this. The situation may still change after Trump's next conversation with President Xi Jinping.

• Risk assets gradually recovered this week, with the S&P 500 regaining the 6,000-point mark. Although the non-farm payroll data fell short of expectations, it aligned more closely with private discussions, and both interest rates and stocks reacted quite calmly. Overall, the macro backdrop still supports risk assets, despite tail risks from escalating trade wars and geopolitical turmoil.

• After Trump's cryptocurrency advisor, Sax, announced a press conference on Tuesday to "outline the government's plans for digital assets," cryptocurrencies quickly shifted attention from Monday's liquidation (with Bitcoin dropping to $90,000 and Ethereum hitting an astonishing low of $2,100) and surged to $102,000 in anticipation of hearing a specific timeline for the U.S. digital reserve. However, the market ultimately ended in disappointment as the related timeline was postponed (within 170 days), causing Bitcoin prices to retreat to the $95,000-$98,000 range for the remainder of the week. It seems that catalysts related to the Trump administration will not take effect until the second quarter.

BTC ATM Implied Volatility

• After the drop in coin prices caused by Monday's liquidation quickly faded, prices returned to a clearer range of $95,000-$100,000. The market began to clear structural long positions prepared for the first quarter after the 2024 election, leading to a significant decrease in implied volatility. The last glimmer of hope was Sax's press conference on February 5th, which caused a temporary spike in short-term implied volatility in anticipation of actual news regarding reserve inventory. However, aside from further delaying the timeline, there was nothing noteworthy from this meeting, leading the market to further clear first-quarter positions and suppress implied volatility. Last week, both high-frequency and daily actual volatility were locked in the low 50s, largely due to the reversal in coin prices on Monday and the subsequent press conference causing excessive elevation.

• A notable phenomenon is the steepening of the term structure, as the market pushes the timing of catalysts related to the Trump administration further out. With expectations that Sax will not provide substantial results in the next 90-180 days, the market continues to clear positions expiring in February and March, while positions for June and beyond remain. At the same time, a very large April/December calendar spread trade (selling April, buying December) was observed, further steepening the term structure.

BTC Skew/Kurtosis:

• The skew for short-term expiration dates continues to decline as the market remains cautious about risks related to trade wars/tariffs, in case of a drop in cryptocurrency volatility. On the other hand, the market seems completely unconcerned about the tail risks above in the short term, continuously clearing bullish/bullish spread positions and further suppressing short-term skew. For expiration dates in June and beyond, skew remains at a relatively high level, as sentiment structurally remains bullish.

• Aside from short-term expiration dates, kurtosis is quite flat. The continued compression of coin price volatility confirms that the market has no interest in strike prices within the $95,000-$100,000 range, while the market is very cautious about strike prices outside this range, especially given the currently relatively low implied volatility, actual and implied volatility could spike quickly due to any breakout in coin prices in either direction.

Wishing everyone good luck this week/month!

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