BTC | Crypto's Biggest Fear Is Fading but One Risk Still RemainsBitcoin/USDTOKX:BTCUSDTmoonyptoBTC briefly broke below the key $58k support level on Wednesday, touching a low around $57.7k before rebounding. A softer than expected headline nonfarm payrolls report on Thursday sparked a relief rally, pushing BTC back above $60k and as high as $61k overnight. ETH led the recovery, climbing back above $1,700. That's almost 10% above its midweek low and well clear of the $1,500 support level that held up last week Volatility Eases The options market has quickly dialed back last week's panic. Front end implied volatility has given up most of its spike, with 1 week ATM IV falling from the mid-40s into the high-30s after peaking near 48. The term structure has also normalized, moving back into contango after briefly inverting during the sell off Skew has softened as well. Front end risk reversals have come off their extremes, although downside protection is still in demand. One to two week puts continue to trade at a 10 to 13 volatility premium over ATM options, suggesting investors are still paying up for protection, just not with the same urgency Flow data tells a similar story. The busiest July contracts on Thursday were calls in the $63k to $66k range, mainly in the 10 July and 31 July expiries. July put to call volume fell to 0.6, pointing to a more constructive tone. On the downside, larger positions have shifted into the 17 July $56k and 31 July $50k puts. Today's expiry also removes a meaningful amount of open interest in the $56k to $58k put strikes, which may help keep BTC trading around the $60k level. With realized volatility running in the low 30s and implied volatility still in the high 30s, option sellers are once again collecting a positive volatility premium Soft Headline, Tougher Underneath While the headline payroll number missed expectations, the rest of the report was far less dovish. Wage growth accelerated, unemployment declined, and consumer spending remains resilient. Together, those signals point more toward a tightening labor market than weakening demand, giving the Fed little reason to change its stance because of one softer payroll print Inflation also remains sticky. Core PCE continued to rise last week, while PPI excluding food, energy, and transportation is still running at 5.1%, even after oil prices have fallen significantly from their April highs. The new Fed Chair also has reason to maintain a hawkish tone early in the role to build credibility, and Warsh's comments so far have reflected that approach Rate Cuts Still Look Premature Markets have shifted expectations for the next rate hike from September to December, but other asset classes are not fully buying into a policy pivot Treasuries barely reacted. The 10 year yield remains around 4.47%, close to the mid-May highs reached after inflation surprised to the upside. That suggests the bond market is not convinced the Fed is turning more dovish Equities sent mixed signals. The S&P 500 finished little changed, while the Nasdaq fell 1.7% as concerns around AI-related valuations resurfaced. Gold delivered the clearest dovish reaction, rising 2%. Even so, that move looks more like demand for a safe haven and lower real rates than a stronger view on economic growth Crypto is beginning to look more constructive. Spot BTC ETFs recorded $224 million of inflows on Thursday, ending a six-session streak of outflows. It was the first positive day in more than a week and suggests buyers are starting to return after roughly $2.4 billion in recent redemptions. The next major test comes with the 14 July CPI release and 15 July PPI data ahead of the month-end FOMC meeting. Those reports are likely to determine whether markets continue to price a more dovish outlook. For now, improving ETF flows suggest spot demand is stabilizing. With U.S markets closed today and liquidity expected to stay light through the long weekend, volatility is likely to remain elevated in both directions Key Events -Tentative: Second round of U.S.-Iran talks -Monday, 6 July: ISM Services PMI (June) -Wednesday, 8 July: June FOMC meeting minutes -Thursday, 9 July: Initial Jobless Claims What do you think? Is this the start of a sustained move higher, or just a relief bounce before the next leg down?