SignalPlus Volatility Column (20240417): Take a breath and reposition
Yesterday (16 APR), the recent strong economic data in the United States caused the Atlanta Fed GDPNow model to raise its forecast to 2.9%, which is much higher than Wall Street's forecast. On the other hand, market concerns about inflation have intensified, and the two-year Treasury yield, which is sensitive to interest rate policy, is about to break through the 5.0% mark. The 2-10 real yield curve has also steepened to its highest level since the end of 2022. At this juncture, Fed Chairman Powell and other officials came out to speak, admitting that recent data showed insufficient progress in inflation this year and that it may take longer to restore confidence in inflation. In contrast, Bank of Canada Governor McCollum said on the same day that the Bank of Canada does not have to follow the Fed's actions. In Europe, European Central Bank President Lagarde also stated that unless there is a major surprise, interest rates will be cut soon. The Fed seems to be isolated and helpless.
Source: Investing, The two-year U.S. Treasury yield, which is sensitive to interest rate policy, is about to break through the 5.0% mark
In terms of digital currency, BTC rebounded from 62,000 to 64,000 in the early morning, and then fell again after the option settlement. However, we can also observe that such price trend patterns appear almost every day this week. It is also within everyone's expectations that some miners choose to cash in their earnings in advance before the BTC halving. There have also been significant declines before the first three halvings, but the influence of miners has shrunk compared with previous years. The price increase this time is also backed by ETFs, so that the tension created by the recent 17% drop can be quickly digested by the market. Although Vol Skew is still at a low level, the part of the IV at the front end of the option has been almost wiped out today. A trader from CrytoQuant commented: "The correct approach now is to enter the market gradually at previously identified strategic points. The path to the current cycle's peak remains open, and we are still at the beginning of this journey."
Source: SignalPlus; NewBTCs
Source: SignalPlus, Front-end ATM Vol falls
But in terms of ETH, there is a risk point that has attracted the attention of the market. According to data from Defillama, when ETH is around 2904 (-5.5% down from now), there will be about 52.5 $M of on-chain loan funds liquidated, close to 18,000 ETH, which may cause the price of the currency to fall further in the run. This risk has also attracted short-term buying of 2900-P in trading.
Source: Defillama, ETH has 52.5 $M on-chain loan liquidations around 2904
Speaking of trading, overall, the ETH front-end is still mainly based on the short Delta strategy, and there are also limited bullish buys in the long term. On the BTC side, the front-end buying of Puts is still hot, but some of the Flow of buying Calls on dips has also begun to gradually return in the past 24 hours.
Source: Deribit (as of 17 APR 16:00 UTC+8)
Data Source: Deribit, BTC transaction duration distribution
Data Source: Deribit, ETH transaction distribution
Source: Deribit Block Trade
Source: Deribit Block Trade
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