BTC Weekly Volatility Review (May 19 – May 26)

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Bitcoin (BTC) posted a solid gain of 6.8% against the U.S. dollar, climbing from $103,200 to $110,200 over the week of May 19 to May 26. Ethereum (ETH) followed closely behind with a 7.3% increase, rising from $2,405 to $2,580. The rally marked a significant milestone as BTC briefly surged to a new all-time high of $111,900, breaking past previous resistance levels.

However, the ascent wasn’t smooth. A sharp pullback followed after former President Donald Trump reignited trade tensions by threatening 50% tariffs on EU imports, sparking a wave of risk-off sentiment across financial markets. This led to a sell-off in equities and a brief retreat in BTC, which dipped below the $108,250–$109,750 resistance zone before stabilizing. Despite this volatility, price action remained contained within a tight range, reflecting market resilience.

Looking ahead, we anticipate a gradual upward trajectory for Bitcoin, potentially pushing toward the $125,000 target** in the near term. While sideways movement may persist—especially if the upcoming Las Vegas Bitcoin conference fails to deliver major catalysts—the underlying momentum remains constructive. A decisive break below the **$101,000 support level, however, could open the door to a deeper correction toward $93,000–$94,000.

Market Sentiment and Macro Drivers

Risk appetite remained present but showed signs of weakening amid growing macroeconomic uncertainty. The U.S. equity markets dipped while Treasury yields rose following Trump’s proposed tariffs on European goods, set to potentially take effect in early June. Although he later walked back the threat and signaled progress toward a July 9 agreement, the episode underscored ongoing policy unpredictability.

This uncertainty has weighed on the U.S. dollar and fueled demand for alternative assets. Gold prices climbed steadily, approaching the $3,400 per ounce mark, while G10 currencies strengthened against the greenback. In this environment, Bitcoin benefited from dollar weakness, leveraging its growing reputation as a macro hedge.

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BTC’s price initially surged to $112,000**, only to face resistance after news-driven liquidations triggered a short-term retreat to **$107,000. Nevertheless, strong buying support emerged around that level, allowing Bitcoin to recover and stabilize above $109,000 ahead of key industry events.

Ethereum maintained a stable trading range between $2,400 and $2,700, with cleaner positioning across exchanges and reduced speculative leverage compared to prior cycles. Meanwhile, stablecoin ecosystems continued expanding, and spot Bitcoin ETFs reported consistent inflows—both positive structural developments.

Still, further upside will likely require fresh catalysts—such as regulatory clarity, broader institutional adoption, or technological breakthroughs in scalability and Layer-2 solutions.

BTC Implied Volatility and Options Market Dynamics

As bullish momentum built during the week, realized volatility began rising from recent lows, driven by an influx of short-term leveraged long positions. However, these were quickly unwound following the tariff-related selloff on Friday.

Despite intraday spikes in high-frequency volatility reaching the mid-40s to low-50s range, daily realized volatility remained subdued. BTC traded within a narrow band of $105,000–$112,000, indicating persistent mean-reverting behavior. This pattern suggests that market makers holding long gamma positions were able to effectively hedge price swings, pulling prices back toward equilibrium after minor deviations.

Implied volatility (IV), meanwhile, held steady across most expiries despite temporary spikes in realized moves. This disconnect highlights traders’ reluctance to price in sustained directional momentum absent major news events or structural shifts.

The volatility term structure remained steeply upward sloping—a sign of strong demand for longer-dated options as investors hedge or speculate on future upside through Q3 2025. Interestingly, near-term expiries saw unexpected IV bumps due to event-driven pricing around the Las Vegas Bitcoin conference.

Notably, the May 28 expiry, which includes the first day of keynote speeches, was priced with an expected move of just 2%—a relatively conservative estimate compared to past major crypto events. This may reflect uncertainty about the conference’s potential impact or cautious positioning ahead of possible regulatory announcements.

Skew and Kurtosis: Gauging Tail Risk and Market Convexity

After a week of relatively stable price action punctuated by brief downside shocks, skew dynamics shifted meaningfully. Initially, positive skew emerged as BTC approached new highs—reflecting bullish conviction and call buying pressure.

However, the tariff-driven dip on Friday introduced negative skew in short-dated options, as put demand spiked amid fears of further downside. This shift was validated by a temporary rise in both realized and implied volatility. Yet as geopolitical tensions eased and Trump softened his stance, sentiment rebounded and skew turned positive once again—particularly in front-month contracts.

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Kurtosis—the measure of tail risk and market convexity—continued declining throughout the week. This reflects ongoing selling of out-of-the-money options (both calls and puts) across major exchanges. Traders appear increasingly willing to collect premium by writing wings, likely due to confidence in range-bound price action and low realized volatility.

That said, we caution against complacency. While current conditions favor premium-selling strategies, any sudden spike in volatility—especially one skewed to the downside—could lead to rapid losses for those short convexity. Given how tightly BTC has been trading near all-time highs, holding some kurtosis exposure (i.e., long straddles or convexity hedges) remains prudent in this environment.

Frequently Asked Questions (FAQ)

Q: What caused Bitcoin’s price drop mid-week despite overall gains?
A: The pullback was primarily triggered by geopolitical concerns when Donald Trump threatened 50% tariffs on EU imports. This sparked risk-off behavior in global markets, leading to liquidation of leveraged long positions in Bitcoin and a temporary dip below $108,000.

Q: Is Bitcoin still on track to reach $125,000?
A: Yes. Despite short-term volatility, structural factors—including strong ETF inflows, stablecoin growth, and macro hedging demand—support continued upward momentum. A breakout above $112,000 could accelerate gains toward $125,000.

Q: Why is implied volatility not rising even as price moves occur?
A: Because actual daily price swings remain small and within predictable ranges. Market makers are effectively managing risk with long gamma positions, reducing the need for higher IV pricing unless sustained momentum emerges.

Q: What role do options skew and kurtosis play in predicting BTC moves?
A: Skew reveals trader bias (bullish vs bearish), while kurtosis indicates tail risk exposure. Negative skew warns of fear; falling kurtosis suggests overconfidence in range-bound trading—both can signal reversals when extreme.

Q: Could the Las Vegas Bitcoin conference act as a market catalyst?
A: Potentially. While current options pricing implies only a 2% expected move, major announcements—especially around regulation or adoption—could exceed expectations and trigger outsized reactions.

Q: What happens if BTC breaks below $101,000?
A: That level acts as critical support. A confirmed breakdown could trigger further selling pressure, potentially extending losses down to $93,000–$94,000—a zone with historical liquidity and prior resistance-turned-support.

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