Yesterday (January 2), traders were shaken in their expectations of a Federal Reserve rate cut, with the likelihood of a loosening policy starting in March dropping from 85% last week to 75%. There was also a reduction in bets on the extent of rate cuts, with expectations now predicting the cumulative rate cut for the year will not exceed 150 basis points. The fixed income market saw active trading, with U.S. Treasury yields rising across the board. The yield on the 10-year Treasury note reported a two-week high of 3.976%, while the yield on the two-year note was at 4.347%. In the stock market, Apple and a number of semiconductor stocks saw declines, influenced by a downgrade by Barclays, coupled with the market’s reduced expectations for Fed rate cuts. This resulted in a mixed performance among the major indices, with the Dow Jones closing flat (+0.07%), while the Nasdaq and S&P 500 fell by 1.6% and 0.57%, respectively. On another note, the U.S. December Markit Manufacturing PMI recorded 47.9, below the expected 48.4. According to Jinshi, S&P Global reported that with U.S. manufacturing orders declining at a faster rate, output contracted again, and manufacturing employment decreased at the fastest pace since June 2020. This week will be busy with data releases, including ISM on Wednesday, JOLTS, initial jobless claims on Thursday, and ISM Services and non-farm payroll data on Friday.

Source: SignalPlus, Economic Calendar
Source: Binance & TradingView

In digital currency, BTC surpassed $45,000 for the first time since the end of 2022 and even briefly challenged the $46,000 mark. The implied volatility of options soared momentarily but receded overall as prices gradually stabilized above $45,000. A significant amount of bearish volatility strategies, represented by Short Straddle/Strangle, emerged in the BTC front end. Additionally, the IV Surface formed a steep slope at the 12JAN24 mark, indicating the market’s anticipation for the ETF approval.

In trading activities, the March vs. June bullish (call) spread strategy garnered attention, particularly in BTC, characterized by selling the 29MAR24–60000-C and buying the 28JUN24–70000-C, with single leg volumes exceeding 1000 BTC. Conversely, the trading direction for ETH was opposite in terms of expiry, with a tendency to buy in March and sell in June.

Source: Deribit (As of 3JAN 08:00 UTC)
Source: SignalPlus
Source: SignalPlus
Source: Deribit Block Trade
Source: Deribit Block Trade

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