Daily Comment Nov 6 2024

Donald Trump has been elected as the 47th President of the United States, currently holding 277 Electoral College Votes and battleground states including Georgia, North Carolina, Pennsylvania, and Wisconsin. 

BTC rallied to a new life-time high as the result became clear, reaching a peak of $75,368. Implied volatility dropped drastically for short tenors, flattening BTC’s term structure while short tenor vol has gone further to exhibit a steep term structure.

While BTC leverage levels did reset before the event, perp open interest shot back up overnight as funding rates have returned to their bullish extremes. Traders returning to leveraged long positions suggests that it could be tough to stay at these price levels without further moves up to pay for the positions. Interestingly, ETH open interest levels neither rallied nor sold off ahead of the election, and remain far below levels seen in early October.

In the short term we expect a binary outcome. While Trump’s apparent victory is certainly the bullish outcome on the night, markets now face the question of how much of the initial move was priced in ahead of time. The overnight move to $75k is a new all time high, but just 1% above the previous all-time high was likely not a price target that justified the bullish positioning ahead of the election. 

Elsewhere in the crypto market, altcoins outperformed BTC in contrast to the growing trend of BTC dominance that had persisted throughout the election campaign. Solana was up 16% and Ethereum up 8%, although this does little to reverse its 2-year long underperformance. Dogecoin (the only other crypto-currency explicitly mentioned by the Trump campaign) has rallied 17% overnight, as has DOGE (a separate token based on Trump’s touted “Department of Government Efficiency”), rallying 50%. However, Trump-themed memecoins MAGA and STRUMP slightly underperformed. 

IBTC Spot ETF outflows were $116.8 MN during the day of the election. This could potentially reverse tomorrow, following the current euphoria in the markets and the correlation between spot price action and inflows that we have observed throughout October.

The next event driving markets is tomorrow’s FOMC meeting. According to the CME FedWatch Tool, the probability of a Fed cut this Thursday is currently at 99.2%, however the likelihood of a subsequent in December has fallen to 68.1% from 79.65% on the 4th of November.