Market Volatility and Strategic Responses: Capturing BTC Opportunities and Passive Income | Weekly Market Insights Recap
During the official YouTube livestream at 8 PM on Oct 10th, Daniel Yu, Head of Asset Management at Matrixport, analyzed the major price fluctuations of BTC and ETH from October 1st to October 9th due to global macroeconomic factors, liquidity changes, and market sentiment. Also, he shared insights on current institutional behaviors in the options market, providing investors with future investment directions and strategic recommendations.
Key takeaways from the livestream
During the first week of October, BTC prices fell from $61,000 to below $60,000. The primary reasons behind this decline were increased global macroeconomic uncertainty and multiple sources of selling pressure in the crypto market. Additionally, changes in Chinese policies led to capital flowback, further intensifying market pressure and hindering BTC’s short-term rebound.
Analysis of Market Volatility Causes
Macro Economy and Market Sentiment
The global stock market’s performance has significantly impacted the crypto market. Despite a slight rebound in the A-shares due to China’s central bank’s reserve requirement ratio cut and mortgage rate adjustments, this did not provide strong support for the crypto market. Instead, the return of global capital to traditional financial markets increased downward pressure on crypto assets.
US Stock Market and Crypto Market Linkage
Strong better-than-expected non-farm payroll data in the US led to a rebound in US stocks, and temporarily boosted BTC prices. However, unlike gold, BTC is seen as a high-risk asset. Amid rising geopolitical risks, particularly heightened tensions in the Middle East, gold prices increased. However, BTC did not exhibit safe-haven properties and fell alongside US stocks, indicating its perception as a high-risk investment rather than a safe-haven asset.
During this rebound, small and mid-cap tokens (altcoins) outperformed BTC, indicating that risk assets performed better during the capital inflow period. This also demonstrates the speculative nature of the crypto market, with liquidity being more concentrated in highly volatile small-cap assets.
Technical Analysis and Market Pressure
Technically, BTC fluctuated around $60,000, failing to break through resistance levels between the 50-day and 200-day moving averages. Each rebound above $61,000 faced strong selling pressure, indicating ongoing market pressure and the absence of a stable upward trend.
ETH, after a significant drop, fell below $2,000, with weak market demand. Despite strong fundamentals in decentralized applications, reduced on-chain activity and weak DeFi demand dragged down ETH’s performance (far worse than BTC), showing it has not yet escaped short-term downward pressure.
Options Market and Institutional Behavior in the Current Environment
Volatility and Institutional Behavior in the Options Market
With increasing global macroeconomic uncertainty, options market volatility has risen significantly. Particularly with the upcoming US elections in November, volatility expectations have become more pronounced. Institutional investors are using the options market to hedge against future market volatility.
Options market data shows that short-term volatility remains low, but volatility expectations for November have significantly increased, especially around the election period, reaching the highest levels of the year. This indicates that the market is highly concerned about the impact of political events, with institutional investors using the options market to hedge against severe market fluctuations in advance. For example, some large institutions have increased their options trading volume around expiration dates (such as late September and early October) by employing a “dual buying strategy” of buying both call options and put options to hedge against future price volatility.
This “dual buying strategy” allows institutions to profit from significant market fluctuations, whether bullish or bearish. Meanwhile, the introduction of the US Bitcoin spot ETF has also attracted more traditional financial institutions to participate in crypto asset options trading, boosting the activity in the options market.
Changes in Funding Rates and Market Sentiment
From the perspective of the funding rates, arbitrage opportunities in the crypto market have gradually decreased. Early in this year, funding rate arbitrage yields were high, but they have now fallen to around 8%, close to US Treasury yields. This indicates a shrinking risk-free arbitrage space amid changes in the global interest rate environment, with funds preferring traditional financial markets, further increasing liquidity pressure in the crypto market.
This phenomenon suggests tight short-term liquidity and increased market volatility, with institutional investors favoring volatility trading in the options market for relatively stable returns.
Investment Directions to Consider
Volatility Advantage Strategies: An Effective Tool to Deal with Market Volatility
With increasing volatility expectations, especially with the US elections approaching, volatility will further rise. This provides opportunities for investors to optimize returns through volatility trading. During October and November, the options market’s volatility curve shows heightened expectations for uncertain events, particularly the demand for hedging political risks.
Volatility Advantage strategies are effective risk management tools in the current environment. By buying call and put options, investors can profit in highly volatile markets, regardless of market direction.
Passive Strategies: Advantages of the M-BTC Buy-Write Strategy
In the current choppy market, Matrixport’s M-BTC Buy-Write strategy is an effective tool for stable returns, designed for long-term BTC holders. This strategy allows investors to earn stable option premium income by holding BTC and selling BTC call options.
One of the main advantages of this strategy is its high transparency and low risk. The M-BTC Buy-Write strategy is particularly suitable for investors who are unwilling to take on the risks of high-frequency trading. Through this strategy, investors can achieve stable passive income in volatile markets, and compared to simply holding BTC, this strategy can effectively reduce losses caused by significant market fluctuations.
For example, during periods of market volatility, investors holding spot BTC can generate income by selling call options every two weeks. If the BTC price rises above the set strike price, investors may lose some of the upside gains, but the overall return remains stable and attractive. M-BTC Buy-Write strategy is particularly suitable in highly volatile markets where investor expectations are uncertain.
Unlike traditional collateralized lending, M-BTC Buy-Write strategy does not require additional margin and has relatively low financing costs, making it an efficient financing and income management tool.
Conclusion
Amid increasing global macroeconomic uncertainty, investors should focus more on risk management and stable income strategies. While the long-term trends of BTC and ETH remain attractive, short-term market volatility is high. Investors need to flexibly use options strategies to hedge risks and enhance returns.
Matrixport will continue to introduce more innovative financial products to help investors achieve steady asset growth in the current complex market environment. Investors can ensure stable returns in volatile markets without losing potential growth opportunities through passive strategies like the M-BTC Buy-Write strategy.
Check out the recording of our YouTube livestream for more details: https://youtube.com/live/FyUF_2mnT84?feature=share
About Matrixport Weekly Market Insight
[Matrixport Weekly Market Insight] is an interactive knowledge-sharing column newly launched by Matrixport, and will be livestreamed each week on the Matrixport official YouTube Channel. We will invite industry-leading product managers, top analysts, and KOLs to discuss investment strategies under different market situations and share their investment experiences.
Subscribe to the Matrixport YouTube Channel to stay tuned on the latest market developments.
Disclaimer: The above content is for informational purposes and reference only. The content does not constitute investment advice. Digital asset transactions can be precarious and volatile. Investment decisions should be made after carefully considering individual circumstances and consulting financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.
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