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While the headlines focus on political friction, the real story is in the mispriced volatility across crypto and equities. We’re seeing a historic divergence that traditionally precedes a massive expansion in realized range. Click below to unlock our specific volatility cone analysis for $SOL and the "hockey-stick" setup we’re tracking in $MSTR.
USA Week Ahead (ET):
- Monday - MLK Holiday
- Thursday 8:30a - GDP
- Thursday 10:00a - PCE
MACRO Overview
There are many macro drivers moving around in every direction for the US markets.
Federal Reserve Chairman Powell is under investigation with respect to his $2.5B headquarter renovations… most market participants view this as an attack on the Federal Reserve's independence.
The market views this as a reaction to the Fed not being dovish enough. A true break in Fed independence would be inflationary (in terms of expectations) and bad for long bond prices. Higher longterm yields.
In the other direction, Trump announced last week that he wants to keep Kevin Hassett in his current role as director of the National Economic Council. Hassett was expected to be very dovish so the statement caught the market by surprise. This was a hawkish move that was a bearish flattening event for bonds.
Precious metals sold off on the announcement, ONLY to rally back higher and open Sunday in new ATHs for both Silver and Gold.
The market is punishing the dollar, and precious metals are acting as a real safe haven hedge.
Another big market-moving event is the geopolitical musings around a Greenland purchase. 10% tariffs announced on European countries standing in the way.
Venezuela, Iran, Ukraine/Russia…
So many things are happening yet VIX stands at 15.86% and DVol at 39.99%.
I definitely like Volatility bets here. Especially with VXSLV currently near ATHs at 81%.
There’s a massive divergence in the volatility space. Precious metals are flirting with near all-time high volatility, while Equities, Bitcoin, and bonds are at historically low levels.
See below:
Chart: VXTLT (bond volatility, 5y weekly chart) via TradingView.com
Chart: VIX (S&P volatility. 5y weekly chart)
Chart: (DVOL - BTC Volatility. 5y Weekly chart) via pro.amberdata.io
Chart: (ETH-DVOL - ETH Volatility. 5y Weekly chart)
This low volatility pricing, across crypto, when everyone should be thinking “I have no idea what’s going to happen next” is the perfect volatility pick-up time.
Then we can look over to precious metals as another segment of the market that’s moving like an “animal spirit” stampede.
Chart: VXSLV (Silver volatility. 5y weekly chart)
Chart: GVZ (Gold volatility. 5y weekly chart)
One could argue that Gold and Silver vol are a sale, instead of doing the crypto volatility purchase… Although true, I just don’t want to stand in front of the precious metals train… At least not yet. It still feels chaotic.
In macro news, jobs and CPI aren’t moving the needle much in either direction; both have been coming somewhat in line with expectations.
This week, we have PCE (the Fed’s preferred inflation gauge) and GDP.
Economic numbers seem rather stable while rhetoric is more unpredictable.
BTC: $92,612 (+1.6% / 7-day)
ETH: $3,210 (+3.0% / 7-day)
SOL: $133.81 (-4.9% / 7-day)
Crypto Options Overview
We already talked about this a few weeks ago, but crypto volatility seems like a solid play today.
There are two good reasons for owning call optionality hedged with delta shorts.
- Overall, implied volatility is low in a chaotic environment.
- The call wing has been sold into oblivion by TradFi players using covered calls for income.
Beyond basic IBIT or BTC options on Deribit, interesting proxies like MSTR could provide even more “bang-for-the-buck”.
Chart: MSTR ATM (Implied volatility of "at-the-money" options)
We can see over the past 18-months, implied volatility for 4-6month options has come down a lot.
Any move higher could bring positive “spot-vol” correlation with the MSTR rally.
That said, I don’t want to get a necessarily long delta outright… I’m just still unclear on the situation.
Any stock market “risk-off” move (due to a credit crisis or something) COULD cause a death spiral for the DATs. That would drag the entire crypto market down, FAST.
Chart: MSTR Skew (Implied volatility differential of calls minus puts for 20 delta)
On the other hand, if we get something insane…like Fed buys Bitcoin (dis the season) then the ∆20 risk-reversal (shown above) would explode higher.
Although unlikely, this wouldn’t surprise me.
A “hockey-stick” chart like we’re seeing in Silver right now seems possible.
Hence the concentration on the volatility play instead of the price direction.
Another interesting volatility play in crypto is Solana. Look at the realized volatility cone for SOLANA over the past 2-year. We’re currently resting on the lows.
Chart: Solana (SOL) Volatility Cone via (pro.amberdata.io)
If we look at the implied chart (below), we can see we’re also near the lows. This is priced similarly to ETH but the market cap size is 20% the size of ETH.
I also think Trump might have a preference for Solana, given the TRUMP coin was launched on SOL and SOL is US-based.
Chart: BTC, SOL, and USDC ATM (Implied volatility of "at-the-money" options)
Food for thought. Again, I like the delta neutral vol play here. Owning the OTM call wing for the volatility.
AMBERDATA DISCLAIMER: The information provided in this research is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information in this report constitutes, or should be relied on as a suggestion, offer, or other solicitation to engage in, or refrain from engaging, in any purchase, sale, or any other investment-related activity. Cryptocurrency investments are volatile and high risk in nature. Don’t invest more than what you can afford to lose.
