BTC Volatility Review (October 6 - October 27)

October 27, 4 PM HKT) $115,600(ETH/USD -7.5% )$4,540

The market has clearly indicated a wave B high point of approximately $126,000, after which the price has been testing the support level between $109,000 and $104,000 for most of the past two weeks, but has now risen again to the resistance level between $114,500 and $117,500. Our view is that this is likely the second sub-wave of a larger degree wave 5 decline below $95,000, but considering the impact of the flash crash event on October 11, it is difficult to assess precisely, and there is a possibility of entering a more complex adjustment phase that may test the wave B high point again (and then correct downwards once more). The support levels below are at $109,000, followed by $107,000 and the range of $105,000 to $104,500; while on the upside, the initial key resistance level is at $117,500, and there is stronger resistance in the $121,000 to $125,000 area. Market Theme The past few weeks have been tumultuous for cryptocurrencies and even the global stock market. The confidence in risk assets surged at the beginning of October (“Rising October”), but faltered when faced with reality. Trump threatened via Twitter before talks with China that if no progress was made on a deal by November 1, he would reinstate tariffs of 155%. This triggered significant de-risking volatility, with cryptocurrencies being the victims, as aggressive liquidations were triggered during a period of low liquidity in the early hours of October 11, Hong Kong time, with Binance at the center of the event. BTC瞬间闪跌至10.2万美元的低点（当日前曾高达12.3万美元） and some altcoins exhibited even more extreme volatility. In the following days/weeks, order book liquidity significantly decreased, leading to actual volatility remaining high until macro risks stabilized, at which point liquidity eventually returned to the market. Looking ahead, Trump and General Secretary Xi are finally scheduled to meet face-to-face in South Korea on October 30, and their main negotiating representatives have communicated on key issues, suggesting the market seems to be preparing for an agreement. Risk assets opened strongly this week, and BTC also rebounded above $115,000. The Federal Reserve is expected to cut rates by another 25 basis points, and based on last Friday's good CPI data, the committee has no reason to deviate from the dot plot expectations from the last meeting. With quantitative tightening policies also expected to conclude soon (J.P. Morgan will hold a conference call this week), a combination of these factors along with a trade agreement may lay the groundwork for a rise in risk assets in the coming weeks, especially considering the market positions feel lighter after this month's de-risking volatility. BTC implied volatility

In the past few weeks, the implied volatility has fluctuated greatly. After the clearing event on October 11, market volatility rebounded significantly from the lows, with actual volatility rising from over 20% to 50%. In the following 10 days, due to the continued thin liquidity in the order book, actual volatility remained above 40%. However, as the price of the currency still hovered in a wide range between $100,000 and $125,000 since May, the market demand for options was relatively muted, and therefore the level of implied volatility did not exhibit the significant “overshoot” relative to actual volatility that we have seen in such fluctuations in the past. The term structure of implied volatility first flattened, as the short-term volatility surged due to the increase in actual volatility leading to higher market demand for Gamma. However, as the order book liquidity returned and spot prices climbed back above $110,000 to $112,000, we saw selling pressure again at the front end of the term curve, but the term premium still existed. The longer-term volatility remained higher than the levels before the entire event occurred, and naturally, the term curve became steeper. BTC Skewness/Kurtosis

As concerns about breaking below $100,000 ease, and positive risk sentiment around U.S.-China relations this weekend helps support spot prices back above $115,000, the skew has retreated from deep out-of-the-money option pricing levels. That said, the pricing of skew is very consistent with actual performance; when spot prices are lower, both implied and actual volatility are much higher, and as coin prices gradually recover, both begin to stagnate. Therefore, the skew structure leaning towards put options should remain unchanged, although short-term misalignments may occur around this 'fair level.' Longer-term peaked pricing rises as the market finally incorporates 'volatility of volatility' into pricing (we have just witnessed actual volatility sharply jump from a low of 25-30% to 50%). Additionally, there is demand in the market for upside wing options (call options) in hopes of a significant price breakout from current levels, while downside wing options (put options) continue to gain support due to the notable pressure exhibited during previous price drop events. Wishing you smooth trading in the coming week!