Today we give a quick update of what we are seeing in the technicals of BTC as well as option vol.
There maintains support and resistance of the downward sloping triangle that we wrote about last week. Friday afternoon BTC ran up to close to $11,000 but was unable to push higher through that level. Since Friday, we have slowly come back off to the $10,200-$10,300 range. Over the time period of this downward forming triangle, you can see the volumes have severely weakened. The appearance of these lines converging happen to coincide with the Bakkt launch catalyst, in which we feel there is a high likelihood of a breakout below this $9,300 support or above this now ~$10,750 Resistance. Only time will tell.
With this in mind, we also note that as we continue this phase of contraction in BTC before the Bakkt launch, vol has continued to sell off. A month ago, vol was in the mid 80’s, last week vol was in the 77%-80% range, and now vol is trading in the mid to low 70’s. Those who have been long options over the last month have been bleeding out with not many opportunities to make back their theta through gamma scalps. Historically speaking, 80% implied vol is fair in our view. As we have said several times since May, implied volatility north of 100% should be sold. We also feel that sub 70% vol sould be accumulated slowly. The Bakkt launch is in 13 days, and it may be wise to start bidding on some vol and gamma late this week into next week in anticipation of a HIGH VOLUME move and a RANGE EXPANSION or BREAK OUT of this current downward slowing triangular trend that has held true since mid-July. That is all for now.