Crypto Markets Daily Nov 8 2024

In last night’s FOMC meeting, the Federal Reserve lowered the target range for the Fed Funds Rate by 25 bps, to 4.5-4.75% in a unanimous decision. Fed Chair Jerome Powell said it is “remarkable how well the U.S. economy has been performing”, citing it as “better than any global peers”. 

This aligns with forecasts made by the IMF in October, which forecasts global growth to be steady and underwhelming, but revised U.S. growth expectations up to 2.8% for 2024 due to resilience in consumption and wage growth. This matches the recently released annualised Q3 growth figure of the U.S. 

Following the election, the market (both polymarket-implied and CME Fed Futures-implied) has priced in a slightly higher probability of no change to the rate in December – pricing down the probability of another 50bps as in September. Powell refused for the most part to comment on fiscal policy or the implications of President Trump’s policies, but stressed “nothing in the economic data suggests that the committee has any need to be in a hurry” to get to a neutral rate.

The post-event dis-inversion in the term structure has not yet followed through to a steepening of the term structure – volatility has remained flat across tenors as the short-end of the curve has fallen to but significantly below the back end. This is a sign that while the pre-election extreme positioning has passed, the premium assigned to volatility at post-election expiries remains.

In contrast, futures and perp positioning remains steadfastly extreme – short-tenor futures basis remains as strong as we have seen it pre-election, and funding rates in perps indicate a continued willingness for long positions to pay for leveraged exposure. Interestingly, this happened alongside a downturn in BTC dominance, which has been on an upward path since the BTC Spot ETF launch. Altcoins, including ETH, have rallied further up as the ETH Spot ETFs, which has registered net outflows since launch due to the conversion of the Grayscale trust, has seen over $100M inflows in two days.