Key metrics: (6Jan 4pm HK -> 13Jan 4pm HK):

BTC/USD Spot Technical Outlook:

The early extension last week was followed by a retracement as initially expected, however this move gained considerable momentum, overshooting our initial target of $94–96k and testing down to low $91k’s. Overall the $92k level was able to hold despite being tested on a few occasions, providing now a strong support and we have bounced back into the $92–98k range. With the new-year attempt at testing the highs, we are starting to see a spot formation that resembles a head and shoulder formation and this further illustrates the potential vulnerability of spot should we break supports and trade below $88k
As mentioned before, there are layers of support below here so we suspect any moves lower locally will be either grindy or choppy rather than a gap, but <$88k, we would expect a more material correction ahead of the next leg higher. The latter is not our base case and for now believe that the next major move is up rather than down but we will reassess the price action over the next few days — we should expect such a paradigm to have generally decent upward momentum in spot and last few sessions certainly lacking in that respect

Strong US data rattled the US bond market this week, dashing hopes that the Fed’s hawkishness in December was overdone and reinforcing the risk of <2 cuts this year (1 full cut currently priced) as the US labour market remains hot, while upward pressure on inflation remains present in average hourly earnings and prices paid. SPX inevitably balked at the higher yields (US 30y briefly touching 5%), ending Friday’s session 2% lower
The situation in global equity markets wasn’t particularly better, with CSI300 falling 5% in the first full week of trading, while pressure continue to mount on the UK economy as scepticism over the current government (well telegraphed by none other than Elon Musk) and weak data drove weakness in the UK bond and equity markets
Crypto markets exhibited high beta to the macro headwinds this week, pulling back from the exuberant early-year start that drove BTCUSD briefly above $102k, though in general the downside has for now been better respected with the higher US rates/correction in equities not obviously medium-term bearish for crypto

Continued choppy local price action did lead to an uptick in realised volatility last week, albeit given the extent of the moves we saw realised still remained in in the low 50s, underperforming the levels of implied on average last week. However in general January expiries have remained better supported at these levels given spot continues to search for clear direction
Further out the curve, we saw pressure on implied volatility as expected, with the levels there extremely high coming into this year driven by large flows in December. The lack of directional trend has also seen structural demand for volatility/directional plays dry up which has also removed natural support for Feb-June expiries

Skew prices trended lower this week as full liquidity returned to the market and with realised volatility picking up on the spot moves lower, particularly driving down January skew to trade in favour of puts across all January expiries. Further out though skew remains bid for topside as the market looks for structurally bullish plays post Trump’s inauguration and once the macro headwinds and position readjustment of January subsides
Convexity was more mixed this week with some demand for wingier strikes outside the $92-$97k range driving front-end surface in particular higher, while further out the curves demand for wing Vega strikes was muted (in fact directional plays to the topside were mainly done via call-spread format, supplying net wings to the market)

Good luck for the week ahead!

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