Key Indicators: (4 PM June 2 -> 4 PM June 9 Hong Kong Time)

• BTC against USD increased by 0.2% (105.4 -> 105.65 thousand USD), ETH against USD decreased by 0.6% (2,510 -> 2,495 USD)

• Last week, the market tested the support level of 99-101 thousand USD but quickly rebounded back to the range of 105-106 thousand USD, strongly suggesting that the coin price is about to attempt another upward breakthrough to a new high in the short term. If this breakthrough fails, the timing of this upward movement may be further delayed, and we may return to the range of 90-95 thousand USD. Otherwise, we expect this price breakthrough to lead us towards the anticipated target of 125 thousand USD, and as the coin price reaches new highs, the actual volatility will also rebound from its current low levels.

Market Themes

• As we enter the last month of the second quarter this year, the market trend is largely consistent with the end of May. Cross-asset volatility continues to decline, and risk assets are gradually rising. Although the SPX wavered in front of the psychological barrier of 6 thousand USD after Trump and Musk publicly clashed last Thursday night, it finally broke through the next day, driven by better-than-expected employment data. Over the past nine weeks, the VIX fear index has dropped from 45.3 to 16.8, marking the largest nine-week decline in history (63%, even surpassing the 58.5% drop from 65.5 at the end of March 2023 to 27.5 at the end of May 2023). Overall, the macro and fundamentals still favor the rise of risk assets in the short term, and the market has adapted to the occasional tariff remarks from the Trump administration. However, considering that we have now returned to normal low volatility levels, we expect market volatility to rise in the short term as the July tariff deadline approaches.

• Bitcoin has been continuously correcting downwards since reaching its historical high last week, including the impact of the Trump-Elon news that triggered a test of the key support level of 100-101 thousand USD, but the coin price quickly stabilized and rebounded from a low of 100.4 thousand USD back to 105 thousand USD within 24 hours. Ultimately, the coin price returned to the upper position of the 100-110 thousand USD range. We have been hovering around this level multiple times since the election ended.

BTC Implied Volatility

• Actual volatility hovered at the bottom last week, failing to rise from the low 30s level when the coin price fell to 100 thousand USD (the price subsequently rebounded); the market's reaction to the non-farm data was also very muted, providing no support for actual volatility. As the coin price returned to the 100-110 thousand USD range, the implied volatility across all maturities will continue to be suppressed. Demand for options has become scarce with the arrival of summer, while the market still appears to hold a large number of long volatility positions, simultaneously selling short-term expirations for support, but considering the upcoming time this month, the front-end value has now become very low.

• The volatility term structure has started to flatten. Given the lack of buyers and ongoing selling pressure, the market has gradually lost patience with holding long-term positions. The rolling decline of the term structure no longer seems so alarming, and considering the currently low actual volatility levels, any breakout could lead to a rapid increase in implied volatility alongside actual volatility - we believe that long-term maturities are starting to become worth holding.

BTC Skew/Kurtosis

• Skew remained flat last week, even when the coin price briefly fell to around 100 thousand USD, the market showed no interest in buying lower. This led to a skew that is biased upwards across the entire term structure.

• The kurtosis remained overall flat last week. Interestingly, despite the decline in implied volatility for the ATM portion, the kurtosis for the long-term has increased. This is because, considering the volatility of Bitcoin asset volatility, the market is unwilling to lower the pricing of the tail, while the ATM portion has gradually decreased due to the stability of the coin price in the 100-110 thousand USD range. We believe that overall this pricing is reasonable and continue to recommend holding kurtosis on shorter maturities to protect against volatility increases when the coin price surges.

Wishing everyone good luck this week!

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