The macro reversal has arrived! From the silver bloodbath to BTC breakdown, beware the "volatility trap" in asset prices [Insight Class Representative Extra Content]

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The Macro Turning Point Has Come! From Silver Crash to BTC Breakdown, Beware the “Volatility Trap” in Asset Prices

>> The views in this article are solely those of the author. The video was recorded on February 1, 2026. Click the video above to watch!

Recently, I feel that various major asset classes have reached an important window period.

Implied volatility is an important indicator we observe in FICC strategies. For example, last week’s precious metals market demonstrated the horrors of extremely high-volatility markets.

This chart shows spot silver prices and 1-month IV. The current IV for silver is the highest since data was available. The main feature of such a high-volatility market is instability: we can't reasonably predict how much prices will rise, nor when the market will collapse. Institutional investors often exit when they see such high volatility, whereas retail investors tend to speculate and favor high-volatility markets. On Friday, silver crashed by more than 30%. I saw many online investors blaming institutional manipulation.

But that’s not the case. Let’s look at this chart – CME silver futures prices and relevant positions. We can clearly see that total CFTC silver positions haven’t grown significantly in the past two years, and have even fallen about 40% from the peak in 2020. As for speculative positions, speculative net longs have been decreasing from 2025 to now. This clearly shows that institutions do not favor such high-volatility markets. So my advice is to stay away from them. I joke with my friends that trading silver above 100 is riskier than going to Macau casinos. In this market, the only feasible strategy is a delta-neutral short volatility strategy, but this requires professional expertise and substantial capital from retail investors.

Some might ask, if high volatility is no good, does low volatility mean it’s safe? Actually, not necessarily: extremely low volatility also harbors risks. High volatility signals great uncertainty, but low volatility often signals underestimation of uncertainty.

This is US Treasury yield and US Treasuries volatility index. We see that current Treasury volatility is approaching levels seen during the pandemic era when the Fed’s rate was 0 and QE was unlimited. Back then, Treasury yields were artificially controlled low, and low volatility was relatively reasonable. But today’s low volatility seems to indicate the market is excessively certain about future monetary policy paths. Looking at the yield curve, as the Fed keeps guiding short-term rates lower, the 10-year yield remains stable between 4.0-4.3.

The long-short spread widens to support high US equity valuations. But the marginal utility of this method keeps declining. Thus, US equity valuations haven't expanded further in the past quarter. At such times, be cautious about valuation shocks brought by lifting the long end of the curve, especially as there is excessive certainty about the Fed's rate-cut path this year.

Looking at OIS spread trends in other countries, it’s clear that major economies’ OIS spreads are generally narrowing, and commodity currencies have even priced in significant rate hike expectations. We must carefully consider – will the Fed’s monetary policy remain independent and continue easing regardless of other economies? Could strong economic data trigger a reversal in rate-cut expectations, driving bond yields and volatility higher and then transmitting to other major assets?

BTC, which we’ve mentioned multiple times as an AI valuation index, broke down first this weekend, which is a side reminder to be cautious about the transmission of asset class shocks caused by yield curve volatility.

Previously, we discussed whether the Fed’s rate-cut expectations would keep pace with other economies. You might try to use the “horse race” game from previous videos to analyze possible future paths for the dollar?

Feel free to share your opinions in the comments – hope this video helps everyone, see you next time.

Risk Warning and DisclaimerThe market has risks and investment requires caution. This article does not constitute personal investment advice, nor does it consider individual users’ specific investment objectives, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular situation. All investments made based on these views are at your own risk.

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