Yesterday (FEB 20), discussions began in the market regarding whether the Federal Reserve needs to resume raising interest rates. Citigroup Group stated that investors should have more hedging measures in place due to the risk of the Fed possibly entering a very brief period of easing followed by a quick return to rate hikes. The U.S. Treasury yields showed a V-shaped trend, with the current rates for the two-year and ten-year bonds at 4.589% and 4.270% respectively.

In the U.S. stock market, prior to Nvidia’s earnings report, the S&P 500 experienced a broad decline led by tech stocks (-0.6%), while the Dow Jones Industrial Average and the Nasdaq Composite also closed down by 0.17% and 0.92% respectively.

Source: SignalPlus, Economic Calendar
Source: Binance & TradingView

In the realm of digital currencies, after Ethereum touched the 3000 level again, it led to a pullback in Bitcoin with both currently oscillating above 51000 and 2900 respectively. Regarding options trading, in the past 24 hours, far-end implied volatility has generally decreased by around 1–2%Vol. ETH’s overall IV level is more than 2.5%Vol higher than BTC’s, especially the front-end IV showing a noticeable increase under the stimulation of challenging the 3000 level. However, option trading volume has not shown a significant increase, with a significant portion of yesterday’s ETH trading focusing on the game around the 3000-C across various maturities.

Additionally, alongside the price pullback, a decrease in Volatility Skew from its historical highs has been observed, with the front-end even dropping below zero. Apart from the common positive correlation between the Skew indicator and prices statistically, from a trading perspective, the significant selling of Call options in BTC in the short term, or the formation of Long Call Spreads (Buy ATM Sell OTM) on 29MAR24, partially explains the decline in the 25d Risk Reversal.

Source: Deribit (As of 21FEB 8:00 UTC)
Source: SignalPlus
Source: SignalPlus
Source: Laevitas, ETH’s touch at 3000 did not lead to an increase in options trading volume
Data Source: Deribit, 3000-C has become a hot spot in the market
Data Source: Deribit
Source: Deribit Block Trade
Source: Deribit Block Trade

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