Crypto Markets Daily Jan 07 2025

$100K Not Quite Enough to Move Derivatives Markets?

Much of the illiquid Christmas break saw Bitcoin’s spot price move sideways, with quieter activity in the wider altcoin market too. Yesterday marked the first real day back at the desk since that illiquid Christmas break, and it appears that the institutional flow of capital has been eager to lift the crypto market back up. 

Bitcoin was briefly holding up above the $100K mark, following two trading days of incredibly strong net inflows. Last Friday, U.S. Spot ETFs registered inflows of $908M that were complemented by $978.6M of inflows yesterday. Inflows of this size are far above the $148.8M average, and were last seen in November, during the post-election exuberance. The ETH Spot ETFs also registered net positive flows of $128.7 MN – we expect that the recent spot rally has likely been driven by a return of institutional capital to the markets.

We also have noted previously that the upward repricing in spot price has not quite translated into a significantly more bullish sentiment in derivatives markets and we saw this today too – implied volatility levels are stubbornly moving sideways with no changes perceived. This emphasises the potential start of a new regime in derivatives markets, where the psychological barrier of $100K is no longer acting as such a catalytical event for volatility or further rallies – as it did in the period before Christmas.

Futures-implied yields have fallen slightly, with a flat term structure for ETH and a (slightly less) inverted one for BTC despite the leg up in spot; further indication that leveraged long exposure is not desired despite the positive spot moves. Overall, derivatives markets are not exhibiting the same exuberant reaction to the $100K that they once were.

Perhaps rightly so… that rally above $100K was quickly met with some macro fire, and BTC quickly took the elevator down to $98K. Tuesday’s JOLTS report showed the highest number of job openings in the past 6 months for the month of November (a figure of 8.098M), well above the expected 7.7M. The job openings for October were also revised up by 95,000. Together, this firmly suggests the labour market is still strong and acts to peter out some hopes of a faster rate cutting path for 2025. In response, we have seen the dollar strengthen, and risk-on assets such as the S&P 500 and NDX taking the opposite path. 

Despite the same JOLTS report showing the Quits Rate, a proxy for worker confidence in switching jobs, falling in November to 1.9% from 2.1% in October, and thus signs that not all is well, the market is clearly more focused on the headline job openings figure. 

Before the release of the JOLTS report, part of the move up to $100K was likely also driven by an article in the Washington Post that suggested President-elect Trump and his administration were discussing plans to scale back the size of tariffs on imported products into the U.S., which would weaken the dollar and bolster risk-on assets. Markets reacted exactly in that vein – yesterday the DXY fell over 1% whilst major stock indices moved up – the S&P 500 closed over 0.5%, NDX finished 1% higher and the MSCI World Index rose 1.20%. 

President Trump however subsequently turned to his social media platform Truth Social to deny the report, claiming the post “incorrectly states that my tariff policy will be pared back”. This resulted in the dollar paring back some of its losses. Nonetheless, that upward momentum in wider risk-assets likely trickled down to the crypto market, alongside the ETF flows. 

Finally, we expect 2025 to be a major year for DeFi, as the regulatory landscape has and likely will continue to shift in favour of altcoins. Things are certainly lining up to be that way with Raydium, one of the main decentralized exchanges (DEX) on the Solana network, surpassing both Uniswap and Ethereum in fee generation over the past seven days, reaffirming heightened crypto trading activity onchain. This is a trend we saw in the latter-end of 2024 too. A continuation of the trend into 2025 however, if maintained, might suggest more tailwinds for SOL as trading activity both in Solana memecoins and DApp protocols rebounds.