Key Indicators: (May 19 at 4 PM -> May 26 at 4 PM Hong Kong Time)
BTC against USD rose 6.8% ($103,200 -> $110,200), ETH against USD rose 7.3% ($2,405 -> $2,580)
Congratulations on Bitcoin reaching a new high! After breaking through the previous highest price, the price first rose to $111,900, then dropped below the resistance level of $108,250-$109,750 due to Trump's tariff news and significant selling pressure, but has since been fluctuating in a narrow range. From the current situation, we tend to believe that the market will gradually rise in a relatively stable manner (with some local fluctuations), which may quickly push the price towards the target of $125,000. Active two-way trading may lead to continued sideways movement for a few days, especially if the upcoming Bitcoin conference in the next few days does not have a significant impact. However, we believe the next price exploration will come soon. If the price pulls back and breaks below the key support level of $101,000-$101,000, the price may further drop to $93,000-$94,000.
Market Themes
Market risk sentiment still exists but is gradually weakening. Due to Trump's threat to impose 50% tariffs on the EU starting from early June, causing US stocks to fall/US bonds to rise, he quickly withdrew this threat and is preparing to reach an agreement on July 9. The continued uncertainty of US policy is affecting the US dollar, with gold prices continuously rising to near $3,400, while G10 currencies are gradually rising against the US dollar.
Despite weak US stocks, Bitcoin benefited from the US dollar's decline this week, with prices rising to a new high of $112,000 before encountering some resistance. Trump's news about imposing 50% tariffs on the EU led to short-term long position selling, pulling spot prices back to $107,000. However, the price then found good support and returned to $109,000 before the cryptocurrency conference. Ethereum continues to remain stable in the range of $2,400-$2,700, with the market clearly having fewer and clearer positions. Stablecoins continue to develop positively, and ETF inflows remain strong, but further upward movement may require a new catalyst.
BTC ATM Implied Volatility
Last week, as the market's bullish momentum increased, actual volatility began to recover from a low point, with short-term high-leverage positions emerging but being cleared after Trump's EU tariff news. Although local high-frequency volatility rose to the forties and fifties, the price ultimately oscillated within the $105,000-$112,000 range, with daily actual volatility remaining very low, suggesting the market is still in a mean-reverting state. The long Gamma positions held by the market quickly pulled back during price fluctuations. Therefore, in the absence of directional trading, although actual volatility has increased, implied volatility remains stable.
The term structure remains steep, with the market seeking to support long positions from June to September by selling front-end expiration dates. The expiration dates within the week unexpectedly increased, as the market priced in an additional premium for the upcoming Bitcoin conference in Las Vegas, with the May 28 expiration date covering the first day's speakers. The market pricing assumes a 2% price fluctuation that day. This pricing is relatively low compared to other Bitcoin conferences, but the importance of the conference is not entirely clear.
BTC Skew/Kurtosis
After a week of relatively stable price movement, skew attempted to break historical highs during the price increase but fell with the rapid price pullback. Short-term skew even leaned downward due to the tariff event on Friday, with subsequent increases in actual and implied volatility confirming the downside. However, with Trump's quick attitude change and potential positive factors from the upcoming Las Vegas conference, front-end skew is again leaning upward.
Kurtosis continued to decline over the past week due to ongoing wing side selling. The market finds it difficult to continue supporting long positions in the middle and wing sides, thus willing to sell wing sides to reduce the impact of decline. Given the very restrained local trend of spot prices and the possibility of actual volatility (and implied volatility) rising sharply and leaning towards one side (such as the significant drop last Friday), we believe it is very worthwhile to hold kurtosis in this environment.
Good luck to everyone this week!
