Key Indicators: (April 21 4 PM -> April 28 4 PM Hong Kong Time)
BTC against USD rose 8.2% ($87,500 -> $94,700), ETH against USD rose 13.2% ($1,590 -> $1,800)
Last week, we saw prices cleanly and quickly break through the key resistance level of $89-91k (in line with the 100-day moving average), faster than our initial expectations (and seemingly beyond market expectations). Currently, we anticipate a brief pause, with prices consolidating in the comfortable range of $92-99k, especially considering the upcoming Labor Day and local Asian holidays.
In the coming weeks, we expect the market to attempt breaking through the $100k resistance level, but there are indeed many sell orders to penetrate first. If it drops below $89k, prices might retrace to $82-89k, but we anticipate strong buying support in the $91-89k range. Medium-term, we remain bullish, expecting to reach new highs in the next few quarters, with target prices between $115-125k, and the current price trend looks clearer after breaking key resistance levels.
Market Themes
Risk assets performed well this week. Trump and Bezos converged on US-China tariff issues, implying acknowledgment of their overly rigid stance (China refused to comply with the "sky-high treaty"), and Trump also denied reports of potentially removing Powell as Fed Chair. Although the reasons for Trump's attitude shift are hard to determine, the timing coincides with his support ratings dropping to the lowest since taking office, which doesn't seem coincidental. It confirms that Trump is still influenced by his voter base and doesn't want to push the US economy into recession, especially before the midterm elections. Long-term bond yields quickly fell from their peaks, and the stock market regained its footing, with the S&P index returning to 5,500 - even after a tough battle, only 10% down from historical highs. The VIX panic index finally dropped below 25 after unexpectedly staying above 30 for a long time.
For cryptocurrencies, Bitcoin's correlation with the S&P index continues to weaken, but still benefited from risk assets, briefly breaking $95k over the weekend. Other altcoins finally joined the rally, showing stronger correlation with risk assets. Ethereum briefly explored $1,800 but still lacks momentum for further increases. Overall, it feels like Bitcoin still faces considerable obstacles before reaching $100k, such as positions that didn't sell during the previous downturn and those hoping to re-enter at lower points between $75-82k. Therefore, we expect prices to remain stable in this range without new catalysts.
BTC ATM Implied Volatility
Despite breaking $90k last week, implied volatility showed a downward trend. This is because the market is simultaneously accelerating the sale of call and put options, especially as risk asset sentiment recovers and Bitcoin's correlation with the S&P begins to weaken. On the other hand, the market expects to see many sell orders before $100k, so it's willing to sell call options at higher prices to hedge spot positions. Meanwhile, actual volatility remains quite low, with price movements being very orderly despite significant variations, with 1-week high-frequency actual volatility basically around the 30s.
The term structure remains very steep. The market is reluctant to price medium-term volatility lower. If the "digital gold" theory of Bitcoin truly holds and breaks its correlation with the S&P, volatility expectations should lean towards selling, as any pullback would trigger more buying. Currently, pricing that shows volatility rolling down 3-4 points within a month of the June expiration date still seems high. We believe long-term volatility should continue to be compressed if market conditions don't change.
BTC Skew/Kurtosis
Short-term expiration skew will lean bullish with each price increase but quickly return to normal. Mainly because actual volatility remains low when prices rise. Long-term skew further returned to the regular level of the past year, as the market is more confident that Bitcoin won't experience volatility spikes during downturns like in the first quarter, even if the S&P index or global stock prices fall.
Kurtosis remained relatively flat this week. At the current price range of $92-99k, local prices are difficult to rise due to low actual volatility, but outside the $88k/$102k range, there's a possibility of actual volatility sharply increasing due to technical and psychological price points.
Wishing everyone a successful trading week!
