SignalPlus Vol Commentary (08 Jul 2024)
In the past 24 hours, the market has witnessed a significant plunge in BTC following the opening of the Asian market. The price momentarily fell below $55,000 before experiencing a mild rebound and a substantial jump back to around $57,500 by settlement time. The surge in actual volatility has placed positions with short gamma on both sides in an awkward position, prompting a significant increase in option implied volatility and resulting in an inverted volatility skew.
Looking at the current situation, there is a clear division of opinions within the community. Pessimistic traders highlight the ongoing selling pressure from the German and US governments, as well as from the Mt. Gox trustee, suggesting that the price might continue to decline. However, more optimistic traders have voiced their opinions today.
These traders downplay the excessive impact of government selling, noting that the BTC sold by governments only accounts for 4% of the last bull market volume. Additionally, despite downward trends in the spot market, ETFs continue to bring positive capital inflows, mainly directed towards FBTC.
Furthermore, a Japanese consulting firm called Metaplanet, dubbed the MicroStrategy of Japan, made a significant purchase yesterday, buying 42,466 Bitcoins for $2.5 million. This brings their total holdings to 203,734 Bitcoins at an average price of about $62,000.
What lies ahead is uncertain, and currently, no one can provide a confident answer. Traders are focusing their attention on this week’s macroeconomic events, including a speech by Fed Chair Powell and major CPI/PPI data releases. In a few weeks, there will be another round of the FOMC meeting. With the current situation still unclear, macroeconomic indicators may serve as an important guide.
Moreover, the market anticipates that the approval of an Ethereum ETF could come as soon as the 11th-12th of this week, injecting further uncertainty into the market and setting the stage for an exciting latter half of the week.
From a trading perspective, the significant data releases on the 11th-12th and the potential approval of ETFs have influenced traders’ strategies. For ETH, traders have heavily purchased 12JUL put options to hedge their long positions. In contrast, for BTC, the recent price rebound has given traders confidence to sell off 12JUL put options, while the volume of long-dated call options has surged. This trading activity is characterized by buying in the wings and selling farther out in the tails, resulting in a flow of long call spreads.
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