Key Indicators (February 3 - 10, 4 pm Hong Kong time)

• BTC against USD rose 2.5% (from $95.1K to $97.5K), ETH against USD rose 2.3% (from $2.58K to $2.75K).

• The decline triggered by liquidation last Monday (to $91K) was quickly reversed, initially being squeezed up to $102K, then forming a somewhat monotonous and boring unilateral wedge trend, resulting in a compression of actual volatility. As the short-term price range continues to compress, we may see a turning point in prices in the upcoming trading sessions. Below the current price level, there is strong support from $96K all the way down to $93K, and the next major support zone will be at $91K-$89K. Considering the liquidation last week, the current market positioning may be clearer. On the upside, the $100K resistance level was strongly rejected after the release of the non-farm payroll data last Friday, and the next resistance level is at $102K. If the price breaks through this point, the technical chart will show a clear upward trend until we re-explore the major top resistance zone of $108K-$110K and the historical high.
• Due to the lack of obvious breakout momentum in the market, the sideways consolidation of prices may be prolonged. In the next 2-3 weeks, if the price correction (or the correction of the pre-inauguration rally) that began in December continues, this trend will become more apparent. In the long run, we still expect prices to rise significantly above $120K, but if the $89K support level is broken, the downward price correction may continue to expand. It should be noted that the breach of this level does not negate the view that prices will continue to rise (but a drop to $60K-$65K will).

Market Themes

• Market panic over the global trade war reached a peak last Monday. But after constructive talks with the leaders of Mexico and Canada, Trump decided to postpone the decision to impose additional tariffs in less than 24 hours, quickly dispelling market concerns. Although the tariff policy on China has already taken effect, the market has expected it. The situation may still change after the next talk between Trump and President Xi.
• Risk assets have gradually recovered this week, with the S&P 500 regaining the 6,000-point level. Although the non-farm data was lower than the expected mark, it was more in line with private discussions, and the reactions of interest rates and stocks were quite calm. Overall, the macroeconomic backdrop still supports risk assets, although there are tail risks of escalating trade wars and geopolitical turmoil.
• After Trump's cryptocurrency czar Sachs announced a press conference on Tuesday to "outline the government's plans for digital assets", cryptocurrencies quickly shifted attention from Monday's liquidation (Bitcoin as low as $90K, Ethereum reaching a staggering $2,100 low) and soared to $102K on Monday evening in anticipation of hearing the specific timeline for the US digital reserve. But the market was ultimately disappointed, as the relevant timeline was postponed (within 170 days), causing Bitcoin prices to fall back to the $95K-$98K range for the rest of the week. It appears that the catalysts related to the Trump administration will not take effect until the second quarter.

BTC ATM Implied Volatility

• After the rapid decline in prices caused by Monday's liquidation, the prices returned to a clearer $95K-$100K range. The market began to clear the structural upside positions prepared for the first quarter after the 2024 election, and the implied volatility dropped significantly. The last glimmer of hope was Sachs' press conference on February 5th, causing short-term implied volatility to fluctuate and rise in the hope of seeing actual news about the reserve inventory. However, apart from further postponing the timeline, this meeting did not have anything noteworthy, and the market further cleared its first-quarter positions and lowered the implied volatility. Last week, both high-frequency and daily actual volatility were actually locked in at around 50, but most of it was due to the reversal trend on Monday and the subsequent press conference that caused excessive upward pressure.
• A noteworthy phenomenon is the steepening of the term structure, as the market continues to push back the timing of the catalysts related to the Trump administration. As Sachs is not expected to deliver substantive results in the next 90-180 days, the market continues to clear positions maturing in February and March, but positions after June still exist. At the same time, the market has seen a very large April/December calendar spread trade (selling April, buying December), which further steepens the term structure.

BTC Skewness/Kurtosis:

• The skewness of short-dated expiries continues to decline, as the market remains cautious about the risks related to the trade war/tariffs, in order to prevent downward volatility in cryptocurrencies. On the other hand, the market seems to care little about the upside tail risks in the short term, continuing to clear upside call/call spread positions and further lowering the short-term skewness. On expiries in June and beyond, skewness remains relatively high, as the structural sentiment remains bullish.
• Aside from short-dated expiries, kurtosis is quite flat. The continued compression of price volatility confirms that the market has no interest in strikes within the $95K-$100K range, and the market is very cautious about strikes outside this range, especially given the relatively low implied volatility, where actual and implied volatility may rise rapidly due to a breakthrough in prices in either direction.

Wishing everyone a great week/month ahead!