The market is pricing in serious macro risk, yet volatility refuses to respond. Precious metals are signaling stress, while equities and crypto remain eerily calm. This is the kind of setup where volatility doesn’t fade quietly; it snaps. Read on to see where traders are positioning for the move.
Recapping events from last week: Davos, GDP, PCE, and Greenland.
We saw 3rd quarter 2025 GDP growth come in at +4.4%, which has been the strongest growth in 2-years. Despite the impact of global trade tariffs.
On the other side of the equation is inflation.
Inflation continues to come in-line with expectations.
PCE came in at +0.20% month-over-month. The annualized y/y reading was +2.8% (above 2.0% target, but nothing too crazy).
The Fed has an FOMC rate decision this week. A month ago the market expected the Fed to cut 25bps with 15% probability; today, that’s only 2.8% probability.
Chart: Target Rate Probability CME FedWatch Tool
Taken together, the economy remains strong and inflation is still slightly above target, but stable. The Fed has remained data dependent with steady hand. A “wait-and-see” FOMC decision makes perfect sense here.
On the dovish side, we are expecting the next Fed Chairman announcement anytime now. This could push markets towards a dovish read.
Another important headline that everyone is waiting for, is the Supreme Court’s decision around Trumps ability to levy tariffs and if any currently collected tariff fees would need to be refunded.
This would definitely move markets and change the geopolitical tactics going forward.
During the Davos meeting, we received more clarity around the Greenland negotiations and Trumps backed of from imposing additional tariffs on Europe.
Gold and Silver continue to rally a lot. Gold is now above $5k and silver above $100. Many people view this as fiat debasement, but 30-yr US bond yields remain steady versus last year. It makes me think something else might be going on. If the currency debasement was solely responsible for higher precious metals, I’d expect long-term yields to also discount the value of “future dollars” (higher yields).
Look at JGBs… the first mover for debasement, imo.
BTC: $86,454 (-9.6% / 7-day)
ETH: $2,810 (-15.3% / 7-day)
SOL: $117.81 (-17.2% / 7-day)
We had a monster week in terms of crypto week-on-week percentage changes, -9.6% (BTC), -15% (ETH) and -17% (SOL).
Those are BIG moves for assets priced with 30-day volatility of 40% (BTC), 60% (ETH) and 60% (SOL).
I continue to think the move here is long volatility with delta neutral positioning.
I would want to structure this using long-dated OTM calls + short the underlying futures.
We can see the spot/vol correlation has been consistently negative over the past 100-days. This relationship likely holds, but the Skew is already priced accordingly.
I want to own the right tail (OTM Call options) as the vol hedge because I think there is Sovereign investment “Gap-Up” risk.
If we see something crazy like the US-Treasury buys $1T BTC to back the USD (or something), BTC will gap higher and spot/vol will instantly flip positive. BIG TIME.
I think this is unlikely to happen, but it provides the hedge that I want against the short futures position. (Again, delta neutral).
Look at where DVol currently sits since its launch in March 2022. 30-Day implied volatility is basically at multi-year lows while the world remains filled with uncertainty and precious metals continue to explode higher, both in terms of prices and in terms of volatility.
Implied term structure has started to move up “slightly” on the weekend selling, but this isn’t much of a move yet.
Skew is basically at local lows (since 2024) which helps me conclude my thesis of owning the OTM call-wing as the volatility portion of the synthetic straddle.
Skew went mega negative during the Nov 2022 FTX bankruptcy.
Look (below) at what happened to the basis during the FTX bankruptcy.
Should we get something similar (thinking that DATs liquidate or massive ETF outflows, reversing the 2025 inflows). We could see the short-futures leg of the synthetic straddle pay-off in spot decline AND basis inversion.
I don’t want to be a bear. I just can’t help but think the consistent underperformance of BTC given the environment in other assets might suggest the long BTC trade is crowded right now.
There’s good reason to think so.
Total ETF inflows into IBIT were record breaking in 2025 and IBIT was one of the BEST ETFs launches in history.
Major corporations allocated balance-sheet to crypto exposure.
Small country sovereigns, like El Salvador, invested into BTC.
The regulatory landscape, geopolitical environment, debasement thesis, all aligned perfectly, but BTC is having trouble finding a marginal buyer.
We might need a short-term/medium-term positioning liquidation before the accumulation trend can resume.
Just a thought. I’m uncertain on spot prices (hence the delta-neutral structure) but very convinced on the Volatility side of the trade (hence the long-vol synthetic straddle).
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