Key Metrics (September 22, 4:00 PM Hong Kong Time -> October 6, 4:00 PM Hong Kong Time)

• BTC/USD rose +9.2% ($113,000 -> $123,450)
• ETH/USD rose +8.6% ($4,180 -> $4,540)

After dipping to $108,000 the previous week due to month-end/quarter-end liquidation, BTC prices rebounded sharply and reached new highs this week. Technically, the anticipated "extension?"-plus-sideways correction appears to have begun. Given that price action is broadly consistent with our long-term horizontal outlook, we continue to view sideways trading as the most likely scenario, projecting a high near $129,000-$130,000. A break below this range would warrant a reassessment of this move, potentially signaling the start of a gradual upward trend. We anticipate initial strong support at $120,000-$118,000 on any pullback, but any break below this range could signal the start of our anticipated sharp C-wave downside correction below $100,000.

Market Theme

The past two weeks have been quite eventful in the cryptocurrency market. Month-end/quarter-end liquidation pushed BTC to a low of around $108,000, ETH briefly dipped below $3,900, and Solver plummeted to $190 after falling below $250. However, as "Golden October" began, market sentiment quickly reversed, with prices rebounding to previous highs of $117,800-$118,000 (where prices found strong support following both the Jackson Hole and FOMC meetings). This triggered some short stops and ultimately led BTC to test and break through its all-time high, briefly topping $125,000. This surge was largely attributed to a "catch-up" rally in gold prices, which reached new daily highs. This was primarily driven by the US government shutdown and growing concerns about stubborn inflation (especially amidst interest rate cuts by most G10 central banks). The stock market also shrugged off the pressure of month-end liquidation, as optimism surrounding AI and data center investments continued to build.

BTC/USD Implied Volatility

Despite significant price fluctuations over the past two weeks, ranging from $113,000 to $108,000 to $125,000, high-frequency realized volatility has remained relatively modest, staying within a range of 25–35 pips. Ultimately, we haven't seen any price gaps, as spot liquidity remains ample within this range. Furthermore, the market appears to be partially taking long gamma positions, primarily due to persistent gamma selling pressure in recent weeks, which has also helped to suppress local price fluctuations.

Lackluster realized volatility has offset the expected increase in risk premiums on price gains and range breaks, leaving the implied volatility curve for maturities one month and longer largely static. Short-dated implied volatility has risen significantly due to unexpected weekend moves, but with spot prices currently balancing around $123,000-$124,000 and realized volatility remaining benign, we can expect implied volatility for these maturities to quickly correct lower. With the US government shutdown, risks associated with the non-farm payroll and CPI data remain "overhanging" due to uncertainty surrounding their release dates. Given the inverted volatility curve, we prefer holding contracts expiring on October 31st to protect against these data and the FOMC meeting.

BTC/USD Skewness/Kurtosis

Skewness has retreated from deeply bearish levels over the past two weeks as spot buying resumed following month-end/quarter-end liquidations, quickly easing concerns about a price plunge below $100,000. While realized volatility has remained subdued on the upside, the market has seen some demand for call options, recognizing the potential for continued upward momentum to "interesting" levels, which could lead to increased volatility. Conversely, the asset's "riskier" side is clearly on the downside, and as funding rates rise and leverage begins to accumulate, the market remains wary of downside liquidations. Consequently, we haven't seen skewness enter bullish territory (except in very short-dated contracts).

Kurtosis began to decline over the weekend, with demand for call spreads leading to flank selling. Furthermore, given the current price level, the market may anticipate renewed upward selling pressure, suppressing upward implied volatility. Meanwhile, some opportunistic downside selling has emerged following the price rally. It's worth noting that a clean breakout above either side of the $115,000-$130,000 range could trigger a sharp repricing of skewness (e.g., a break above $130,000 would favor calls, while a break below $115,000 would significantly favor puts). Therefore, dynamic adjustments in skewness gamma are suppressing kurtosis.

I wish you a successful trading week!

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