Bitcoin And S&P 500 Volatility Update: Backwardation Drives Deepening Pullback

Summary I am shifting from a hedged long to a straight bearish stance on Bitcoin and Ethereum, closing spot longs and running outright shorts until technical and structural signals improve. Repeated failed attempts to force a BTC squeeze, crisis-level backwardation, and dealers flipping short gamma indicate heightened near-term downside risk, with $77,000 as a key breakdown level. SPX faces elevated circuit-breaker risk due to negative correlation calendar spreads, an unhedged 250,000 put wall at 6,000, and compressing volatility risk premiums. I remain bearish on oil and US bonds, see tactical upside in the CORN ETF, and view FXY as a potential beneficiary of a Japanese carry trade unwind. The Days Since September 4th My September 4th update was bearish on Bitcoin and Ethereum, a downgrade from the purely bullish position I had held up to that point. Authorized participant ETF inflows, which had supported the rally, failed to hold BTC above $78,500 and ETH above $2,500 into the August 28th monthly expiry. That let dealers unwind their delta hedges. I initially suspected the unwind called for a near-term technical pullback, BTC to $72,000 to $67,000 and ETH to $2,100 to $1,800. My original article framed that pullback as a harmonic pattern, a bearish shark with room to evolve into a bullish 5-0, one that would keep BTC's uptrend intact above the all-time 0.618 retracement and inside its linear regression channel. So instead of selling outright, I moved to a hedged-long stance: keeping iShares Bitcoin Trust ETF ( IBIT ) and Grayscale Ethereum Staking ETF ( ETHE ) longs on while adding ProShares UltraShort Bitcoin ETF ( SBIT ) and ProShares UltraShort Ether ETF ( ETHD ) dollar-for-dollar as a defensive hedge against the downside. That was a main shift from the earlier bullish trade, but I still held onto the overarching bullish thesis. The Fed's Standing Repo Facility interventions in Q4 2025 backstopped a resumption of commercial-bank lending, which pushed the corporate debt maturity wall out to 2028-2031 through a refinancing wave. The results of that money-multiplier effect are showing up in the True M1-GDP and M2-GDP spreads, both turning positive. Rize Research Historically, this combination has preceded BTC expansions of 700% to 1,500%, not the roughly 100% moves seen in 2024-2025. What has changed is the near-dated picture. Some of the market's mechanics have turned severe enough that I am moving past the September 4th hedged-long stance into a straight bearish position on BTC, ETH, and the broader market until the risks detailed below clear. On S&P 500 Futures (SPX), my previous article pointed to the same volatility and correlation risk premium curves I build on here. The base case was an SPX reversal off its rising wedge toward the 2.618 Fibonacci extension, aligning with the upper $6,000s, ahead of a further leg higher toward the 3.618 retracement and an eventual rollover once the 2028-2031 maturity wall and inflation catch up with it. Timeline: The $81,000 Strike Call That Failed to Squeeze the Options Chain 3 Times. The times below mark when each data point was pulled from the options chain, not when the underlying trades were placed. September 8th, 1:54 PM. The BTC options chain showed roughly 5,000 call contracts at the $81,000 strike, expiring that same day, a position sized to force market makers into a gamma squeeze. Rize Research The trade was executed through an OTC block instead of on-screen and through the order book, therefore hiding the buyer's size and securing cheap, leveraged upside while putting dealers on the other side of the position. laevitas Dealers who sold those calls went short gamma and had to buy BTC futures to stay delta-neutral, and the mechanics had two potential outcomes: Rize Research A push above $79,500 would force dealers to keep buying into strength as their hedge fell further behind, raising delta on the OTM calls and pulling spot toward the $81,000 strike; a chop below $79,000 would let the calls' delta decay toward zero and let dealers sell off the hedges they had built. Rize Research The calls expired worthless. BTC never reclaimed $79,500, and the $81,000 strike deltas never got the push they needed into the close. September 9th, 7:22 AM. The chain showed the trader repositioned at the same strike, with 4,400 to 5,000 more calls added across the next two expiries. Rize Research The trade cost $8 to $15 million in premium and added about $250 million in delta exposure to the chain. For the last few days of that week, that flow was the only thing keeping BTC's dealer positioning net bullish. Strip it out, and the chain would have been sitting in negative delta and gamma for the rest of the week, the kind of setup that tends to end in a volatile move below gamma-neutral. September 9th, 1:52 PM. When I reloaded the chain again that afternoon, even with a vol crush underway, $78,500 stood out as the key downside level, a strike sitting in a negative-vanna zone that had been the chain's main source of support. A break below it would flip Vanna positive, reinforcing downside instead of cushioning it, with $76,500 as the reasonable target. Rize Research September 9th, 2:49 PM. Delta exposure tied to the strike fell from $250 million to $170 million within the hour. The pace of the unwind had me speculating whether a fund or a bigger player, something like Bitmine Immersion Technologies, Inc. ( BMNR ) or Strategy Inc. (MSTR), was behind it. That was only speculation, but it was enough for me to sell call spreads on both. By 5:29 PM the same day, delta exposure had fallen further, to $133 million, down from a peak near $246 million: a decline of nearly half in a single session. Rize Research The cycle of decay kept repeating over the next three days; by September 10th at 8:44 PM, the position that had carried $246 million in delta exposure at its peak was down to just $51 million. Rize Research By September 11th at 1:56 PM , it was down to $11 million. The trader had lost an estimated $13 million to $20 million in premium over the week, having paid $700 to $1,000 per contract. Rize Research September 11th, 5:10 PM. By that evening, with the position's remaining delta down to single-digit millions, the chain showed something that mattered more than the position itself: the negative flipping of the gamma structure. The last positive-gamma contribution from the trader's expiring calls was set to roll off that night. Once it did, gamma neutral would rise to meet spot and perhaps surpass it, pushing dealers toward an overall net short-gamma position heading into the weekend. Rize Research September 12th, at options settlement: The final leg of the position expired worthless, and the chain returned to organic positioning for the first time in five days. Rize Research By the end, what I had observed that week was a buyer with enough size to introduce more than $246 million of dealer delta exposure tried three times to force a gamma squeeze and failed every time. The capital burned in that failure is capital that will not show up as a bid the next time BTC tests resistance or tries to hold support. Gamma neutral on the chain has since moved up to spot, where dumping risk builds if BTC loses immediate support. Rize Research Implied volatility kept being crushed through the afternoon of September 12th even as BTC kept falling. That could mean dealers are actively suppressing vol into a level they expect to hold, or that realized volatility is about to catch up to a curve that has been pricing calm for too long. The chain could also be put-heavy and well hedged, in which case this is just a slow bleed until $77,000 breaks. Rize Research Heading into this week, the move off the recent highs could be a major square-up, a sharp drop and partial recovery inside a still-intact range, or the start of a real breakdown. The downside does not meaningfully open up unless BTC trades below $77,000. The chain already sits below gamma neutral, but the negative gamma concentrated below that level does not build real downside acceleration until price actually trades under $77,000. Backwardation Crosses into Crisis Territory The pullback flagged on September 4th now has a mechanical face to it, arriving inside a liquidity cycle I still consider structurally bullish for BTC. BTC's term structure inverted over the same window the $81,000 strike was unwinding in. The monthly-to-weekly ATM implied volatility ratio sat at 0.987 on September 9th, a fraction below flat, then fell to 0.919 within hours and continued to 0.899 by September 10th. I treat anything under 0.91x as a stress threshold when it comes to BTC’s backwardation events and anything under 0.82x as a major danger zone for outsized volatility mainly to the downside as dealers become shorter gamma exposure during these events and given how rarely BTC's curve trades this deep into backwardation. Rize Research The backwardation concentrated between the 3-day and 16-day tenors, with the curve smoothing out again past 50 days to expiry. That points to the market pricing a specific near-dated catalyst, not a broad repricing of BTC's forward volatility. 0-1 day volatility barely moved even as the 9-day tenor spiked to the level of the 1-month. The event being priced was at least two days out, not overnight. Rize Research ETH's term structure broke in the same direction for the first time in the weeks I have tracked it. The curve had stayed comparatively well-behaved through ETH's recent volatility. A portion of it turning negative for the first time means the instability I've been describing in BTC is spreading across the correlation complex, not staying contained to one asset. BTC and ETH have a tight historical correlation, and I expect ETH's mid-term downside to track BTC's. Update: As of September 15th, 2026, the front end of the term structure is steepening rapidly into backwardation. Volatility risk is escalating faster than I can finalize this article. Rize Research Rize Research The Rising Correlation Risks Against the SPX The volatility risk premium and correlation risk premium both kept sliding across the SPX curve, from the 1-month through the 6-month tenor, extending the trend I brought attention to on September 4th. Cboe's implied correlation indices are my reference point for the implied correlation side of that curve. The VIX3M/VIX contango ratio fell from 1.122 at mid-morning to 1.106 by late afternoon on September 10th and kept sliding into the afternoon. The 9-day to 1-day calendar spread deflated, which looks calming on the surface, but every tenor of implied volatility rose that day, and the front end rose faster than the rest of the curve, thus pushing the ratio down even as correlation kept rising. Meanwhile, realized correlation on both the 1-month and 3-month windows sits flat near zero, well below what implied pricing suggests. As that gap closes, realized correlation should rise to meet the implied, and volatility rises with it. Rize Research The contango ratio compressing because the front end is being bid harder than the back end is a more dangerous signal than one compressing because the back end is calming down, and unfortunately, what I observed was the more dangerous of situations. The volatility risk premium and correlation risk premium curves show similar risks but from a different angle. Rize Research Rize Research The 3-month minus 1-month implied correlation calendar spread went negative intraday on September 10th: the market briefly priced more correlation risk into the next month than into the next quarter. The same thing preceded the pre-market backwardation on September 3rd, which I noted in the previous article. This time, just as I feared, the repeat did not recover as well as the last one: front-end correlation stayed backwardated through the entire trading day, and SPX closed down nearly 1% following its gap down. Rize Research If realized correlation catches up to implied, instead of implied falling back to realized, stocks start trading more like each other and less like a diversified basket. That pushes realized volatility up to meet implied and compresses the volatility risk premium faster than it compresses the correlation risk premium. The combination would crush the dispersion trade across the front and middle of the curve. That's a big part of why I've moved my SPX bearish target from the $6,965 level I had been working from internally to a range closer to $5,638. Update: September 15, 2026, midday. The volatility metrics have shifted even more bearish for SPX today, in the same direction as BTC and ETH. The 1M-9D implied volatility spread, slightly positive before, has now turned slightly negative, putting the front end of the curve into backwardation. The correlation spread remains fully backwardated on the front end, shown below. Rize Research The updated term structure shows the same pattern; implied correlation remains backwardated on the front end, and the 9-day implied vol has now moved slightly above the 1-month. That may just be the start. The curve could keep shifting on the front end until the 1-day rises above the 9-day, too. Rize Research The 250,000 Put Wall Dealers Haven't Hedged Yet SPX options data shows more than 250,000 puts bought at the $6,000 strike, the majority expiring 20 to 30 days out from when the flow was picked up on September 10th. Rize Research Net gamma exposure on the SPX chain sits at negative $71.82 billion. Dealers there are already short gammas, mechanically selling into weakness and buying into strength across the existing book. The gamma and delta tied specifically to the new $6,000-strike puts barely register against the chain's current size. Dealers haven't started hedging that block yet. Rize Research The delta on those mid- and longer-dated puts will keep rising as spot falls toward the $6,000 strike, forcing dealers to sell futures and cash index in size to stay hedged. The initial descent toward that zone might look orderly, right up until dealers cross the threshold where they have to hedge even part of the position. I expect the resulting downside acceleration to be faster than most market participants are prepared for. Rize Research From Bearish Case to Circuit-Breaker Risk The prior update discussed SPX risk as a standard bearish setup; since then, the correlation calendar spread has gone deeply negative again, the put wall at $6,000 remains unhedged, and BTC's backwardation has hit crisis levels, all inside the same 48 hours. That combination moved my internal characterization from a routine downside warning to language I'd normally reserve for tail scenarios, up to and including the possibility of Level 3 circuit breakers on a large enough single-day move. I'm not forecasting that as my base case, but the mechanical data is pushing it closer to becoming one, which is why this update carries more urgency than the one on September 4th. That could put a wrench in the second half of the September 4th setup, where SPX was expected to find a bottom, reverse, and continue tracking the liquidity cycle higher toward the 3.618 retracement before the 2028-2031 maturity wall eventually caught up with it. This new data changes the outlook on how violent and how mechanically forced the initial leg down could be before that later bullish reversal gets its chance to play out. Author/RizeSenpai: TradingView Before the 250,000 puts at the $6,000 strike showed up, price action looked supportive near the bottom of the wedge. With the recent backwardation troubles, rising yields, and bulls' failure to stabilize dispersion across the board, I think the bearish divergence at the 3.168 level has a real chance of breaking SPX out of this wedge and toward the gaps left behind, notably the one at $5,695.90. Pairing this with the dividend-adjusted SPY tells a similar story: SPY sits at its 3.618 rather than its 3.168. That Fibonacci confluence raises the odds, in the worst case, that this marks the actual top of the equities cycle. Author/RizeSenpai: TradingView Oil, Bond Yields, The Consumer, And The Japanese Carry Trade My framework on oil hasn't changed despite renewed attention on Red Sea and Bab-el-Mandeb shipping risk. Retail gasoline demand growth has slowed to a crawl, and China's EV adoption curve keeps eroding the marginal barrel of retail demand even as refining capacity stays ample. That leaves crude pricing power sitting almost entirely on the industrial and reserve side of the ledger. Oil doesn't have the demand backing to sustain a move higher until inflation actually comes down, and getting there would require the kind of monetary tightening and dollar strength that would also weigh on the broader economy. Absent that shift, I expect oil to stay range-bound before eventually breaking below $70 and potentially toward $48 if the liquidity stress described above in equities and crypto spreads into a broader macro event. I remain bearish on oil despite its positive correlation with the M2 and True M1 money-supply-to-GDP spreads highlighted in the prior articles. Author/RizeSenpai:TradingView Oil is trading back around $100, at the PCZ of a bearish Deep Gartley with the RSI overextended. I suspect it comes back down to at least fill the gap left behind at $56.50. Looking at my M2-GDP and True M1-GDP spread correlation graphs side by side, bonds are consistently deeply inversely correlated to both spreads, while yields are positively correlated. Rize Research I especially like the technical setup on the iShares Aggregate US Bond ETF ( AGG ), which currently has developed a bearish bat visible on the weekly and monthly and is currently breaking below the 55-week EMA after bearishly diverging on the RSI, implying that the ETF will drop and that US bond yields across the board are set to rise. Author/RizeSenpai:TradingView The technical setup here would generally target the C and A points of the harmonic, which would take the ETF to around $82, representing about a 15-20% decline. While the unemployment rate shows somewhat of an inversion to the spreads, the real disposable income shows a much greater inverse relation to the spreads, which favors the argument that oil and real estate will have a hard time rising further in an economy where the consumer is struggling to keep up with inflation. It is notable that the Teucrium Corn Fund ETF (CORN), Teucrium Soybean Fund ETF (SOYB), and Teucrium Wheat Fund ETF ( WEAT ) maintain high correlations across the two measures along with CPI: Food at Home and Refiners. CORN is especially interesting because not only does it have agricultural demand, but it also has demand from crude oil refiners, as corn is used to produce ethanol through fermentation, and refiners need this ethanol to refine their crude oil for consumers. Green Plains Inc. ( GPRE ) remains my favorite player in the space in terms of its low 9.95x P/E ratio that is directly involved in this fermentation process, though there are more higher-valued players like REX American Resources Corporation ( REX ). The CORN ETF is currently bullishly diverging at the 0.618 on the monthly and I think it can make a 0.618 retrace to the high at around $36.90 as it breaks free from its downtrend. Author/RizeSenpai Precious metals silver ( SLV ) and gold ( GLD ) are also inversely correlated with the rise in these spreads, which lines up with their usual inverse correlation to yields. If that holds, I'd expect gold and silver to decline moderately from current prices. In the meantime, as manufacturers look for alternatives, I'd watch rare earths, copper, aluminum, steel, and iron. All this talk of rising yields, inflation, and a weakened consumer ties into the Japanese carry trade. The single biggest and fastest driver of US bond yields would probably be a carry trade unwind: selling USD-yielding assets back into dollars, then into yen, at whatever rate is available to cover a leveraged borrowed-yen position. We saw a version of this in the 1990s, when a yen carry unwind was partly responsible for the collapse of LTCM . The scale of the decline in USD-JPY from that period is below. Author/RizeSenpai:TradingView If something like that happened again, a cascade of assets would get marked to market, including US bonds, sending yields on debt markets and overnight securities sharply higher. That would eventually force the Fed to backstop the repo market again through balance sheet expansion, adding to inflation. My own view is that the Fed's best move would be to do nothing and let the disinflationary pressure pass. The consumer would end up better off, and savings would be worth more. Historical precedent says that isn't how the Fed usually responds, though. Of all the catalysts for a yield spike beyond inflation itself, I think a carry trade unwind is the biggest and most likely. That's part of why I've grown interested in Invesco CurrencyShares Japanese Yen Trust ETF (FXY), an ETF built to give JPY-USD exposure that also has an options chain. During the last carry trade unwind, it rose more than 60% over a couple of years, and I suspect we could see similar performance this time, up to the 0.618 retrace. Right now it's at the HOP of a bullish butterfly, with bullish divergence visible on the monthly chart. Author/RizeSenpai Updated Positioning I am moving past the hedged-long stance from September 4th. That update held core spot exposure in IBIT and ETHE while adding SBIT and ETHD dollar-for-dollar as a defensive hedge against a temporary dealer unwind. The mechanics since then, the repeated failed squeeze, backwardation at crisis levels, a dealer book flipping short gamma into the weekend, and implied volatility decoupling from price, argue for a straight bearish stance instead: closing out the core BTC and ETH spot longs and running SBIT and ETHD as outright short exposure rather than a hedge, sized beyond dollar-for-dollar, until BTC reclaims $82,000 on a weekly close or the term structure returns to flat-to-contango across the 3- to 16-day tenors. Absent either, $72,000 to $62,000 serves as an interim target rather than a floor, with $77,000 as the level below which the gamma profile on the chain opens up further downside. ETH's invalidation and targets scale with BTC, given the correlation breakdown described above. None of this reverses the structural liquidity case underneath both assets. It just means I no longer think the near-term risk is worth carrying core spot exposure, a more bearish stance than September 4th's hedge-and-hold approach. USDT Dominance is holding its line of best fit, with the RSI far extended. If price action stays symmetrical and plays out as projected, it should rise back to the PCZ of the bearish harmonic and retest the linear regression channel's resistance once or twice more before declining, confirming the bottom in crypto. Author/RizeSenpai:TradingView On SPX, I am keeping the short-dated OTM bear call spreads and mid-dated long put positioning described on September 4th, including the November 20 AM expiry $7,450/$7,250 bear put vertical spread already on. The current premium of this spread has gone up from $27 to $37.55 a piece since the last article, but I still think they represent a good value for 60+ DTE protection. Here is the risk-to-reward structure of buying two of these spreads: Rize Research This spread structure sized against the conservative $6,965 target is worth holding onto, especially if you got it earlier on; once maximum profitability is reached, it could be worth rolling down in profit into a similar spread to play the move to the maximum downside target of $5,638 with a similar DTE. Direxion Daily S&P 500 Bear 3X ETF (SPXS), ProShares UltraPro Short S&P500 ETF (SPXU), and ProShares UltraPro Short QQQ ETF ( SQQQ ) remain short-to-mid-term hedges for passive holders in my view rather than long-term positions. Given that tech is one of the biggest risk factors in the repo market, I would not be against entering short-to-midterm OTM bear call spreads on the Nasdaq-100, as the NASDAQ 100 Index ( NDX ) generally provides a lot of premium to sell week to week.