Yesterday (January 10), traders were cautious ahead of the release of CPI and initial jobless claims data. U.S. Treasury yields saw a slight uptick during the day but eventually gave back all gains, with the current two-year/ten-year yields at 4.341% / 3.993% respectively. All three major U.S. stock indices ended higher, with the Dow Jones, S&P, and Nasdaq rising 0.45%, 0.57%, and 0.75%, respectively. New York Fed President Williams mentioned in his speech that the current rate is restrictive enough to achieve the 2% target, and the Fed could consider rate cuts when there is confidence in meeting the 2% inflation target. The speed of the rate cuts will depend on the economic situation. He also noted that it’s not yet time to slow down the balance sheet reduction, aiming for a gradual realization in 2024.
Cryptocurrency experienced a historic day on January 10, when the SEC, with a 3:2 vote, officially approved the listing of Bitcoin Spot ETFs. Many of the approved exchanges quickly announced plans to attract funds by reducing fees, sparking a frenzy in the crypto community. Despite SEC Chairman Gary Gensler casting the decisive vote, he reiterated in a statement that Bitcoin has not been recognized by the SEC, emphasizing once again that Bitcoin is a speculative and volatile asset. The approval of Bitcoin spot ETFs will lead to more regulation. In terms of price, perhaps due to the ‘dress rehearsal’ the day before, the market was prepared, and BTC rebounded from 45,000 to just below 47,000 without further breakthrough. There were multiple instances of selling pressure from early profit-taking, causing fluctuations. As seen in the comparison chart above, the market showed more enthusiasm for ETH, allowing it to finally break away from its usual weak correlation with BTC. ETH surged during the day, successfully breaking through the 2,600 point barrier.
In the options market, following the confirmation of the ETF event, the overall Implied Volatility of BTC significantly dropped to around 60% due to a relatively calm spot market reaction. The extent of the curve inversion weakened. In contrast, the market seemingly mapped out a larger blueprint for ETH’s future upward potential, assigning it higher uncertainty. The middle-to-back end IV of ETH fell less, with its various maturities’ IV levels being 6 to 8% Vol higher than BTC. In terms of trading, the bullish strategy of buying calls still dominated the bulk market. The volume of ETH trades saw a significant boost. A large number of Long Call Spread orders, exemplified by the 23 FEB 24 2700 vs 3100, flooded the market, leading to a noticeable upward movement in the Vol Skew across various maturities.
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