Sticking To The Script

On Day One … Well it certainly looks like President Trump is sticking to that script – according to various news sources recently and Bloomberg today, Mr Trump is likely to issue an executive order supporting crypto regulations on his first day back in office. Not only has he been an avid supporter of digital assets since the pre-election period, but he has also issued the most executive orders since President Carter! One of the potential issues speculated to be addressed in that order is the repeal of (SAB) 121 – an SEC report that stated banks and other crypto custodians should hold digital assets as liabilities on their balance sheet, making liquidity requirements more difficult. 

Speculation or not however, derivative and spot markets were quick to react. BTC is currently trading at $102K, firmly above the $100K level it was unable to hold yesterday. With that move up, futures yields and perp funding rates have skyrocketed. Future yields at the front end of the term structure have reached highs of 25% and funding rates are at their highest level in over a month – both showing an increased interest for long-leveraged exposure by market participants. See this below.

Implied vol movements are reflecting similar sentiment, with volatility at short-tenors slightly above 55%. The term structure inverted briefly and then flattened, as seen in the chart below. Interestingly, the past few inversions of the term structure have been occurring without the back-end of the term structure moving higher whilst short-term expectations steadily move higher.

In other macro news, earlier this morning the National Bureau of Statistics, NBS, announced China’s yearly GDP figures, alongside other important labour market metrics during a much-anticipated press conference. According to the NBS, annualised Q4 growth in China was 5.4%, pushing annual gross domestic product growth to 5%. This was slightly higher than what economists had predicted and in line with the country’s growth targets. 

Other positive news included the growth in total retail sales to 3.7% year-over-year in December. This is a slight increase from November but is evidence that the trillions of yuan in stimulus provided by both monetary and fiscal policy are showing some positive tremors of transmission. The data does not mean China is completely out of the woods however – there is a strong possibility the Q4 growth was driven by temporary factors as many firms front-loaded exports of their products amidst fears of an increase in tariffs when President Trump takes office next week. 

Furthermore, despite extensive stimulus to drive up the declining property market, NBS data showed that the property sector contributed only 6.3% to total GDP in 2024, a figure which was upwards of 25% prior to 2020 when China’s property market was booming. 

We also see some interesting developments in DeFi, a sector that has more potential than ever as one of the biggest beneficiaries of the Trump regime’s regulatory clarity. EDU Chain, Open Campus’ layer-3 blockchain, was unveiled today aiming to change the education industry by enabling institutions to issue and store degree qualifications on-chain. 

Additionally Coinbase, in collaboration with lending protocol Morpho, just launched Bitcoin-backed loans of up to $100,000 USDC where Bitcoin holdings on Coinbase can be used as collateral for access to these loans.