Yesterday (December 19th), Richmond Fed President Barkin, who will have a voting right in next year’s FOMC, made a statement indicating that the Federal Reserve has made good progress in reducing inflation but wants to see more consistent data before starting to lower interest rates; Chicago Fed President Charles Evans also spoke, stating that the Fed has not committed to cutting rates and noted that the market’s current reaction is somewhat premature. Despite Fed officials pouring cold water on expectations for rate cuts, Treasury yields continued to fall, with the ten-year yield breaking below the 3.9% threshold to report at 3.891%, and the two-year yield at 4.386%. The three major U.S. stock indices all closed up, with the Dow Jones index setting a new closing high, ending at 37,557.92 points (+0.68%), and the S&P 500 and Nasdaq composite rising 0.59% and 0.66%, respectively. In terms of the Japanese yen, the Bank of Japan decided to maintain its benchmark interest rate and YCC unchanged, and Governor Haruhiko Kuroda stated at a press conference that the possibility of a rate hike at the next meeting is very low, and it is currently difficult to determine a plan to exit the negative interest rate policy.

Source: SignalPlus, Economic Calendar
Source: Binance & TradingView

In terms of cryptocurrencies, the price of BTC slightly fell to $42,000 after yesterday’s close, but then gradually recovered almost all losses, closing near even (-0.3%). Regarding options, the near-term implied volatility for both BTC and ETH was once again lowered, with a slight increase in the back-end, leading to a steeper overall curve. This is influenced by the market’s anticipation of a possible SEC decision to approve a BTC ETF at the beginning of January, keeping BTC’s ATM Vol at a local high point for the 12th of January 2024. In trading, a large volume of at-the-money call options for BTC expiring in December were sold off, while calls on the wings for the 12th and 26th of January continued to be bought, partly explaining today’s steep IV Curve. For ETH, the trade of a single-leg, nearly 10,000 ETH 1950 vs 2100 Long Put Spread expiring on the 5th of January drew market attention, providing a hedge for potential downward price volatility at the beginning of the year.

Source: Deribit (As of 20DEC 08:00 UTC)
Source: SignalPlus
Source: Deribit Block Trade
Source: Deribit Block Trade

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