Crypto Markets Daily Nov 18 2024

Bulls Reloaded

Bitcoin fell below $90K over the weekend, but bounced back today close to $92k. While implied vol trended sideways during the weekend, front-end volatility never fell below longer-dated tenors which caused the term structure to remain flat. Sunday afternoon saw the term structure once again and potentially indicating expectations of another volatile week of price action ahead as price re-rallied.

The round-trip in price action was relatively low-volatility. This is expected as we have observed lower than usual volatility over most Saturdays and Sundays. We observe this in data even before the 2024 regime of ETFs, but it is further reinforced by the narrative that institutions have been driving price action of late through the access afforded them by the ETFs. Last week BTC ETFs recorded $1.8B inflows – most of that was on Monday Nov 11, with Thursday Nov 14 recording the third largest single daily outflow since launch (-$400.7M).

Derivatives markets reflect the start-of-week bullishness. Sentiment indicators have been growing more bullish alongside the growth in short-tenor vols. Market participants are seeking exposure to upward price movements through call options and futures yields have been on the rise just as perp funding rates are strongly positive, indicating leverage buildup for both tokens.

Friday provided further for Chair Powell’s recent comments that the Fed is in no hurry to cut interest rates: U.S. Retail Sales showed an increase of 0.4% from September to October, exceeding expectations of 0.3%. The September figure was also revised up. Powell’s previous hawkish comments had resulted in a pullback in BTC, as was the case for many of the Trump Trades (S&P 500, Russel-2000).

We note that Bitcoin mining stocks (such as MARA, RIOT, and CLSK) have given up a lot of their post-election gains. Even though Bitcoin has rallied by 35% since the election on Nov 5, 2024, there are more variables to consider when evaluating miner profitability. For instance, the election date coincided with an increase in network difficulty that resulted in a 4% drop in the expected number of bitcoins mined per hash.

Total trade volume on Decentralised exchanges (DEXs) on Solana surpassed Ethereum significantly – on Sunday the former record recorded $6.24 billion in volume, whilst ETH DEXs recorded $850 million. This aligns with the outperformance of Solana’s memecoin ecosystem in particular that we have been observing. Fees generated since Nov 15, 2024 have flipped between the 2 blockchains with Solana on top, following a peak from Ethereum on Nov 13, 2024. Solana, now fluctuating around $240, is continuing to push higher and nearing the ATH seen previously in 2021 at $259.96, while ETH remains over 30% below its own ATH.