The market generally tends to be cautious:Weekly Market Review from Blofin

Blofin

High volatility in the digital asset market continued this week. It is worth noting that despite the recovery in the prices of mainstream digital assets, both BTC and ETH have seen a significant decrease in implied volatility. The significantly lower implied volatility compared to early September reflects the relatively neutral and cautious attitude of the market towards the recent trend.
  • Near the quarterly delivery of derivatives, market uncertainty increased significantly and historical volatility stabilized at a high level. Affected by this, market sentiment turned neutral, and the low implied volatility and positive difference of volatility indicated that the market attitude was tending to be cautious. 
  • Supervision and legalization of cryptos are advancing simultaneously in many countries. At the same time, institutional investors are supporting the application and investment of cryptos. 
  • Derivative delivery coincides with a stronger US dollar, and the crypto market may face greater downward pressure.

High Asset Volatility Continues, While the Market is Generally Cautious

This week, the high volatility of the crypto market continues. Affected by the approach of quarterly delivery of derivatives, bitcoin's historical volatility has slowly increased from about 80 to about 85, while Ethereum's historical volatility has continued to be above 110. However, from the perspective of volatility changes, the volatility changes of mainstream cryptos this week are all around 5%, which is relatively small compared with last week.

It is worth noting that although the prices of mainstream cryptos have rebounded, both Bitcoin and Ethereum have seen an obvious decline in implied volatility. Judging from the volatility term structure, the significantly lower implied volatility in early September reflects the market's relatively neutral attitude towards recent trends.

Judging from the market volume, the peak of market volume this week appeared during the fake news release period about LTC, but compared with the spot market, the derivatives market was relatively affected by the news. On September 14, the derivatives market volume once again exceeded $110B , of which the derivatives volume in Binance, Huobi and OKEx exchanges exceeded $10B on that day, but from the monthly data, the volume change was still in the normal range.

Compared with last week, the change in the premium in the futures market is not obvious, indicating that the bullish expectations of the market are still relatively stable. In addition, the negative premium of bitcoin futures on the CME exchange was smoothed out and a significant positive premium appeared, indicating that investors' expectations are generally optimistic and confidence has recovered. Considering the concentration of institutional investors on the CME exchange, the recovery of institutional confidence may be an important signal of long-term strength in the market.

Regulatory Actions Benefit Markets, While USD Atrength may Bring Greater Volatility

This week, the impact of national supervision on the crypto market was relatively positive, but the regulatory signals sent by U.S. regulators on stable currencies also brought some new uncertainties.

Following El Salvador, Cuba's crypto regulations came into effect, and crypto has now become a legal payment method for commercial transactions in Cuba. The legalization of cryptos in third world countries has further consolidated the macro fundamentals of the crypto market.

Two-thirds of South Korea's crypto exchanges are set to be wiped out under a regulatory overhaul in one of the world's largest markets for cryptos. The Financial Services Commission has set a September 24 deadline for offshore and local exchanges to register as legitimate trading platforms. Most local exchanges in South Korea are struggling to meet these conditions, with nearly 40 of the country's 60 crypto operators expected to be shut down, according to the regulator. The measures are in fact a boon, given that more than 90% of transactions in compliant cryptos are already taking place in South Korea.

The chairman of the Securities and Exchange Commission has displayed a neutral approach to the crypto market, but the US Treasury discussed potential stablecoins regulation this week. Treasury officials asked at a meeting this week whether there was a need for direct regulation if stablecoins became very popular. They also discussed how regulators should try to reduce the risk of too many people switching stablecoins at the same time, and whether major stablecoins should be backed by traditional assets. The information gathered at this week's meeting may help the Treasury prepare a comprehensive report on stablecoins in the coming months, but it also creates new uncertainty in the crypto market.

The scale of institutional investment in cryptos has further expanded. The total assets of crypto ETFs have tripled from $3B at the end of last year to $9B in June this year, according to ETFGI, a consultancy. Crypto ETFs are still awaiting approval from US regulators, but they have been listed in other jurisdictions, including Canada, Switzerland, Germany and Jersey.

In addition, commercial organizations such as Paypal and AMC cinema have further expanded the scope and usage scenarios of crypto payment this week to provide endorsement and support.

Looking at macro data, the monthly rate of retail sales in the United States recorded 0.7% in August this week, significantly exceeding the expected -0.8%. The data shows that the economy continues to recover, and investors may once again question the claim that inflation is temporary, and wait for a stronger statement at the Federal Reserve FOMC meeting next week. Affected by this, the US dollar continues to strengthen, and the strong US dollar often affects investors' risk appetite significantly after the following 2-3 days. Some large traders and institutional investors will choose to exit positions during this period, causing downward pressure to increase. Considering the upcoming quarterly delivery of derivatives, which coincides with the strengthening of the US dollar, the crypto market may face greater volatility in the near future.

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