BTC Volatility Weekly Review (January 5 - January 12)

Key Indicators (January 5th Hong Kong Time 16:00 -> January 12th Hong Kong Time 16:00) BTC/USD -1.0% ( fell from $92,600 to $91,700) ETH/USD -0.5% ( dropped from $3,165 to $3,150)

The spot market for BTC continues its sideways consolidation trend since late November, with declining realized volatility frustrating both bulls and bears. The price movement can be viewed as operating within a wedge pattern, which is statistically slightly more likely to eventually move downward (forming a final reversal), but given the solid support levels observed over the past two months, this could also be part of a longer-term and more complex upward correction process. No definitive conclusion has been reached yet, but overall we believe that the downside potential (in terms of magnitude and volatility) from the current position will be limited, while the upside has greater potential for terminal movement. However, we do not expect explosive price movements or volatility. A drop below $89,000 or a rise above $95,000 could catalyze a breakout from the current consolidation/wedge pattern. We recommend patience as the market attempts to determine its next move.

Market Themes The first full trading week of 2026 ultimately closed with generally flat asset prices across various classes. As “full liquidity” returns to the market, some extreme intraday fluctuations experienced during the holiday period due to liquidity shortages (e.g., precious metals) are beginning to normalize. The macro environment still broadly supports risk appetite, with the S&P 500 reaching a new all-time high, just below the psychological threshold of $7,000, closing around $6,966. Despite ongoing geopolitical noise (Venezuela, Iran, Greenland), these narratives are difficult to reflect in daily trading, as everyone is focusing on more structural layouts for the coming year, ignoring short-term noise. Cryptocurrencies lag behind the overall risk assets again, losing momentum before the key resistance zone of $94,000-$94,500 after a positive start to the year. Last week, ETF fund flows turned net outflows for most of the time, turning the initial $1 billion net inflow in the first two days into a flat net flow since the start of the year. From an asset allocation perspective, even at current prices, the market still seems more inclined to allocate to gold as a hedge against dollar depreciation, while for stocks/risk appetite, the market remains more willing to directly allocate to equities. Before clear signs of upward momentum/volatility or structural catalysts shift (e.g., the US purchasing BTC as a reserve asset), cryptocurrencies may continue to be overlooked under the current mechanism, giving way to other assets.

BTC/USD ATM Implied Volatility

Implied volatility generally declined last week, as realized volatility remained in the 30–35% range, and the upward buying spree that started at the beginning of the year has already subsided (in fact, after failing to break $94,000, fund flows shifted toward selling/reducing long volatility positions). The term structure of implied volatility has begun to steepen, with short-term daily volatility pricing dropping to around the mid-30% range, aligning with recent realized volatility. This inevitably affects all options expiring before the end of January, with daily volatility pricing still around 48% at the high end, resulting in a steepening effect. As long as the price remains within the $88,000-$94,000 range, front-end volatility may decline rapidly, so we may continue to see pressure on the front end. On the longer end of the curve, after experiencing high volatility in Q4 last year, the market remains cautious about structurally selling volatility at current levels.

BTC Skewness/Kurtosis

As the upward momentum at the start of the year wanes and the supply of upside volatility increases, skewness has further tilted downward over the past week. When prices rise, realized volatility remains subdued, but it accelerates during spot price corrections, indicating a notable local correlation between spot prices and realized volatility. However, given cleaner market positions and a macro environment still supportive of risk appetite, the market does not seem concerned about sustained declines in volatility at current levels, which limits the magnitude of skewness. Kurtosis remains relatively flat, with prices finding support within the $88,000-$94,000 range. Directional trades on either side of this range are mostly in the form of bullish or bearish spreads, continuously exerting downward pressure on kurtosis. The market’s expectation of a substantial breakout from this range in the short term remains limited.

Wishing you a smooth trading week!