Weekly Overview
The crypto market has kicked off 2025 with notable developments. Bitcoin remains near $95,000, consolidating within a range of $90,000 to $105,000 after failing to break the psychological $100,000 mark. In the broader financial context, the VIX index (a measure of market volatility) shows relative calm, but the contango curve remains flat, signaling potential underlying tensions in traditional markets.
Bitcoin’s behavior continues to partially decouple from traditional indices like the S&P 500, creating opportunities for diversification. However, traders should remain cautious of potential shifts in both markets.
Bitcoin Chart Analysis
In the weekly BTC/USD chart:
● Range consolidation: Bitcoin has traded between $90,000 and $105,000, showing a clear consolidation pattern. This range reflects market indecision but could provide a base for a breakout in the coming weeks.
● Key indicators:
○ Net Unrealized Profit/Loss (NUPL): At a solid 55%, indicating that most holders remain in profit zones, reinforcing market stability at current levels.
○ S&P 500 correlation: Currently at 0.41, a significant drop from past levels near 1, highlighting Bitcoin’s increasing independence as an asset.
Volatility and VIX Structure
The VIX index has stabilized around the 15-20 range after significant spikes in 2024. While this reflects surface-level calm in traditional markets, the volatility cone for Bitcoin provides deeper insights:
BTC VOl Structure
● Short-Term Stability: The current implied volatility (IV) for shorter expirations(1-7 days) is below historical extremes, staying closer to the median and 25th percentile. This suggests that the market is pricing in lower immediate risk.
● Medium-Term Volatility: Between 14-30 days, the current IV begins to move slightly above the median, hinting at expectations of increased activity in the near term.
● Long-Term Uncertainty: Beyond 60 days, the implied volatility curve steepens significantly. While still below maximum historical levels, the current IV exceeds the 75th percentile, signaling heightened market uncertainty over a longer horizon.
Implications for Traders:
● Short-Term Opportunities: The lower IV in the short term may present opportunities for option sellers to capture premium efficiently.
● Cautious Long-Term Approach: The steepening IV for longer expirations reflects broader uncertainty in the crypto market, requiring careful positioning for long-term trades.
This dynamic mirrors the broader volatility trends in traditional markets, as reflected in the VIX term structure, where risk perception is contained in the short term but remains elevated for future time frames.
Skew Analysis: An Opportunity in Disguise?
Skew Analysis and Strategic Opportunities
The skew analysis reveals:
● 7 days: 10D and 25D puts are heavily overpriced, with percentiles at 90 and 100, respectively, reflecting strong demand for downside protection.
● 30 days: Skew remains elevated, with puts in demand while calls are undervalued.
What does this mean?
High skew in puts creates opportunities for strategies like selling puts at key levels or utilizing bull put spreads to capture elevated premiums.
Updated Strategy
Our previous strategy involved selling a put at the $90,000 strike and buying a call at the $105,000 strike, both expiring at the end of December. With Bitcoin closing between these levels, the strategy was cost-neutral.
This type of semi-bullish strategy is effective in uncertain market conditions, providing potential upside exposure if the market rallies, while minimizing costs if the market consolidates or slightly pulls back. In this case, with Bitcoin remaining range-bound, we placed a cost-neutral bet.
Takeaway
This approach demonstrates how to capitalize on periods of moderate volatility andunclear direction, leveraging options to profit without incurring significant costs if the market fails to make a decisive move.
Recent News: Trump’s Bitcoin Involvement
In recent developments, President-elect Donald Trump has expressed strong support for Bitcoin, proposing the establishment of a strategic Bitcoin reserve for the United States. This initiative aims to integrate cryptocurrency into the mainstream financial system, potentially influencing Bitcoin’s adoption and market dynamics.
Additionally, Trump has launched a new Bitcoin-based NFT collection, further signaling his endorsement of the cryptocurrency.
These actions have generated optimism within the crypto community, with expectations of a more favorable regulatory environment and increased legitimacy for digital assets under the upcoming administration.
Conclusion
The start of 2025 emphasizes the importance of staying informed and adaptable in this dynamic market. As Bitcoin consolidates near all-time highs, traders should monitor traditional markets and regulatory developments, such as those proposed by President-elect Trump, for signals that could influence crypto assets.
Happy New Year! Here’s to a successful 2025 filled with new opportunities and valuable lessons in the world of crypto trading.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Every investment involves risk.
About Author
SpreadGreg is a distinguished Principal Trader and CEO at GP Asset Management LLC in Chicago, with over 11 years of professional trading experience. Specialized in financial options and commodity futures strategies, he combines technical skill with strategic insight.
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