In the just-concluded Federal Reserve policy meeting, a 25 basis point rate cut was expectedly implemented. The Fed announced the restart of purchasing (T-bills) worth $40 billion. The dovish stance can well supplement financial system liquidity, which is undoubtedly a clear positive for the market.

However, it is premature to restart QE and call for a bull market now. With Christmas and year-end settlements approaching, the liquidity in the crypto market during this period has historically been the worst, with low market activity and limited momentum to restart a bull market.

According to cryptocurrency options data, currently more than 50% of options positions are accumulated by the end of December. The largest pain points for BTC are at the $100,000 mark, and for ETH at $3,200. The implied volatility (IV) for major maturities has been declining throughout this month, indicating that market expectations for volatility this month are gradually decreasing.

Notably, Skew has shown persistent negative bias this month, with Put prices significantly higher than Call options at the same Delta. The reasons for this are mainly twofold: firstly, the market is stable, and covered call strategies are regaining dominance, artificially suppressing Call prices; secondly, recent weakness in the crypto market has led many traders to use puts to hedge against declines.

Overall, the crypto market is currently quite weak, and year-end liquidity is also poor. Market sentiment is subdued, and the most mainstream options market view is a slow decline. However, there is also a need to beware of sudden positive news that could trigger a reversal (though the probability is relatively low).