Crypto Markets Daily Nov 22 2024

President-elect Trump's promise to rid crypto of the spectre of Gary Gensler appears to come true, as the current SEC chair announces his departure from the role on inauguration day. ETH legged up on the day, along with several other previous SEC targets, and derivatives markets price in a bullish skew towards OTM calls at both short and long tenors. However, the move does not move the cross-pair back beyond election-day levels and ETH Spot ETFs record a 6th consecutive trading day of outflows regardless -- in contrast to BTC's $1B inflows on Thursday.

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On Day One

More all-time highs were recorded late Thursday – BTC breached $99K and SOL reached new highs of $264 (now above its 2021 cycle peak). While ETH did rally yesterday (up 8%), it was for a very different reason to the price lag relative to its recent ecosystem growth that we highlighted in yesterday’s note. Current SEC chair Gary Gensler announced that he plans to step down on January 20th, President-elect Trump’s inauguration date.

Figure 1. BTC / ETH spot cross pair since the U.S. presidential election on Nov 5, 2024 (grey dotted line at 06:00 UTC 2024-11-06. *Source: Block Scholes*

Gensler has been a vocal driver of the SEC’s crackdown on crypto-assets that they believe acted as securities, including ETH and SOL, and the announcement of his departure saw many previous SEC targets outperform. XRP was the best performer among the top 10 cryptocurrencies by market cap in the last 24 hours, trading up 33.5%.

There was more positive news for ETH holders too – would-be “Ethereum-killer” Sui, a layer 1 blockchain which is up 450% YTD, had a network outage that stopped validators from processing transactions or producing blocks. This resulted in the SUI token dropping ~10%, before recovering in line with the network’s recovery. This is the first significant outage on the network since its mainnet launch in May 2023 and highlights the Layer-1 dominance discussion.

Derivatives markets responded well to the move. ETH skew now indicates a strong preference for upward exposure, stronger even than what is priced in for BTC across the same tenor.

Figure 2. ETH 25-delta call-put skew at several constant tenors. *Source: Block Scholes*

Staying with derivatives – futures-implied yields have skyrocketed in the past hours, with 7 day tenors flying above 30%, indicating an extremely strong demand for leveraged long exposure. This will only increase interest in capturing the basis – popular among institutional traders and a possible explanation for the large inflows to BTC’s Spot ETFs.

Figure 3. Term structure of annualised futures-implied yields for BTC (yellow) and ETH (purple) at a 2024-11-22 09:00 UTC snapshot. *Source: Block Scholes*

Despite the spot rally in ETH, its spot ETFs once again recorded net outflows for the 6th trading day in a row. In contrast, BTC Spot ETFs inflows amounted to $1B million on 21st November seeing their 4th best day ever since launch. In addition, yesterday’s out-performance against BTC was sharp but small. Staying with derivatives – futures-implied yields have skyrocketed in the past hours, with 7 day tenors flying above 30%, indicating an extremely strong demand for leveraged long exposure. This will only increase interest in capturing the basis – popular among institutional traders and a possible explanation for the large inflows to BTC’s Spot ETFs.

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