BTC Volatility Review (July 21 - July 28)

Key Indicators (From July 21, 4 PM HKT to July 28, 4 PM HKT) BTC/USD -0.3% (119,400 USD → 119,000 USD), ETH/USD +2.4% (3,800 USD → 3,890 USD)

Last week, the market entered a consolidation phase, with a brief attempt to test the support level of $115,000 on Friday. After briefly dipping below this level, it quickly rebounded, ultimately holding the line. Currently, the price has returned to the consolidation range, but upward momentum has somewhat increased. On the surface, this pattern lays a strong foundation for a return to historical highs (ATH). If a breakout occurs, the target price may point to the range of $125,000–$135,000. However, if it falls below $115,000, the pullback may continue to deepen, potentially reaching around $112,000. If the stronger support at $109,000 is lost, it could lead to a larger price adjustment, and we will need to reassess the trend. Market Theme Overall, market sentiment remains optimistic: the earnings data from the US stock market remains robust, continuing the "Goldilocks" scenario, and economic data paves the way for the Federal Reserve to cut interest rates in the coming months, with no significant signs of rising inflation risk. Although there are still noises regarding tariff issues, the peak of uncertainty has passed, and most countries (except for China) have ultimately compromised to the demands of the US/Trump, making the US the biggest beneficiary. Cryptocurrencies generally maintain strength in this environment, but crypto-related stocks (such as $SBET and $BMNR, which are ETH concept stocks) experienced a significant pullback last week as the market returned to rationality and the meme craze subsided. However, spot prices have not been significantly dragged down: ETH holds steady above $3,700; BTC, despite facing pressure from long-term holders selling $9 billion through Galaxy (executed last Friday), still shows strong support around $115,000, rebounding to above $119,000 after the weekend. Current participation in the bull market is slightly subdued due to the summer off-season; if the macro environment stabilizes, it may attract more capital inflow in the coming months. BTC USD ATM implied volatility

The actual volatility fell to the mid-20% range early last week (as the spot price was stuck between $118,000 and $119,000). However, before the weekend, MSTR announced a $2.5 billion stock issuance (originally planned for $500 million), which briefly pushed the price up to $120,000, and then a $9 billion sell-off on Friday caused the spot price to drop to $115,000. Although it recovered to $118,000 and tested $120,000 on Monday morning, the short-term implied volatility still declined, as the market was clearly in the bullish Gamma excess range of $115,000 to $121,000. The term structure gradually steepened, but it still appeared flat compared to historical levels, making it difficult for the market to price long-term term premiums. However, the liquidity of long-term option sellers has dried up, coupled with localized price fluctuations (such as dropping to $114,600 on Friday), leading us to continuously see the market trying to capture directional opportunities through options expiring in September to December — considering the underlying volatility is low and the leverage is higher. BTC USD Skewness/Kurtosis

Skew: In the short term, demand for put options has surged (due to Friday's sell-off raising concerns over a deep pullback to $112,000–$110,000), while the hedging buy orders at the $110,000 strike price for the 1-2 period further push up the bearish skew. Although actual volatility has not significantly increased and volatility is equally intense when the price rebounds, it is expected that the skew price is difficult to maintain at current levels unless $115,000 is confirmed to break down. Long-term demand remains concentrated on call options, supporting an upward skew. Kurtosis: In the short term, it has risen due to increased demand for winged put hedging. The butterfly curve is severely inverted, compounded by BTC asset volatility being at historical highs. In this environment, the strategy of "longing long-term butterfly options + shorting short-term butterfly options" offers better cost-effectiveness. Wishing you successful trading this week!