OTC Desk Market Update: Halving and Volatility — What’s Next For Bitcoin?
Welcome back to our weekly market update! Here are the top things we’ll be paying attention to this week:
- U.S. GDP Report on Thursday.
- U.S. Core PCE Inflation Data on Friday.
- Options Expiry on Friday.
Macro
Treasury Yields Rise
U.S. Treasury yields rose on Tuesday, with the 2-year yield briefly surpassing the 5% mark. The 2-year Treasury yield was last trading at 4.981%, up more than 4 basis points. The yield on the 10-year Treasury rose more than 3 basis points to 4.659%.
Fed Chair Powell’s Remarks
Federal Reserve Chair Jerome Powell stated that inflation has yet to ease back to the central bank’s target. He cited the lack of progress on inflation, adding to recent concerns that the central bank may take longer to lower rates than investors had been anticipating. Powell’s remarks echo recent statements from other central bank officials, such as San Francisco Federal Reserve Bank President Mary Daly, who said there was “no urgency” for the Fed to cut interest rates.
Courtesy of investing.com
Courtesy of CME FedWatchTool
Crypto Market Overview
Implied and Realized Volatility
Realized Volatility (RV) remained elevated throughout the week, influenced by geopolitical tensions and a hawkish Fed. Bitcoin’s 10-day realized volatility has reached the 70s, while Ethereum’s RV has skyrocketed to about 100. This dramatic spike suggests a heightened market response to global events, creating a shift in investor sentiment and market dynamics. The geopolitical tension between Iran and Israel, coupled with recent U.S. CPI data, although not triggering massive volatility as expected, has led to an increase in macroeconomic correlations, driving the volatility further.
Courtesy of Laevitas
Courtesy of Laevitas
Courtesy of Laevitas
Term Structure and Skew
Bitcoin’s term structure is now in contango, mostly due to Implied Volatility (IV) collapsing in shorter dated options. The backend curve has barely shifted over the last month with many traders still positioned to to take advantage of post-halving volatility in the price of Bitcoin. Ethereum has also returned to contango with a steeper curve than Bitcoin, reflecting trader interest in longer dated Ethereum options since a U.S listed spot Ethereum ETF approval has been delayed.
Skew in the market has flipped notably, with a steep curve in the front-weekly puts transitioning to a calmer long-term call skew. This indicates that investors are bracing for potential downside risk in the near term while remaining moderately optimistic in the longer horizon.
Courtesy of Laevitas
Courtesy of Laevitas
Options Flows and Positioning
Option volumes increased by approximately 25% from last week. This increase is attributed to a rise in hedging activities, due to recent volatility and geopolitical uncertainty. Ethereum’s option flows continue to be dominated by put buyers, which has been further compounded by doubts regarding the timely approval of U.S-listed Ethereum ETF.
Gamma positioning in Bitcoin has remained relatively stable, suggesting a balanced market dynamic at certain price levels. In contrast, Ethereum’s gamma has shifted significantly, potentially indicating a more reactive or sensitive market to price movements below key levels such as $3,000 USD.
Courtesy of Laevitas
Courtesy of Laevitas
As always, our team is here to assist you and provide services tailored to your specific needs. If you would like to discuss these topics further, we invite you to book a meeting with our team.
To schedule a meeting, please visit NDAX OTC | Bitcoin and Crypto OTC Trading Desk or contact your OTC representative directly. We look forward to assisting you on your investment journey.
Don’t forget to follow us on social media for more updates and join the conversation on our forums.
Check us out on X, Instagram, Facebook and YouTube.
Disclaimer: This article is not intended to provide investment, legal, accounting, tax or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.
