Trump has won the election by a wide margin, sparking a strong market reaction.
The USD surged 1.68% to 105.44 following the news, though it has since pulled back to around 104.5.
US Treasury yields rose as well, with the 10-year up 6 bps to 4.34% since Tuesday.
Interestingly, the 10-year breakeven inflation rate remained stable at 2.33%, reflecting market expectations of stronger economic growth and increased fiscal spending.
Risk assets also performed well, showing that a strong USD alone is not enough to weaken real assets.
Equity volatility took a sharp dive, with the VIX dropping to 15.19, reflecting the market’s view that the real risk event would have been a Democratic victory.
Last night’s FOMC meeting brought an anticipated 25 bps rate cut, and markets expect another 25 bps cut at the December meeting.
The outlook for next year suggests a year-end target rate of 3.75%—a full 100 bps lower than current levels.
Compared to last week, this stance remains unchanged.
This continuity should be positive for the markets, though it raises questions about the Fed’s independence under the Trump administration.
Some may even view the Fed as having already become a highly politicised.
Turning back to crypto, BTCUSD is up by USD 7,400 since Monday, aligning with expectations implied by volatility markets.
The term structure remains rich, with term-futures trading at 3 bps/day and implied volatility relatively flat at 50v for weeklies and 53v for 30-day.
With 7-day realised volatility at 65%, this suggests a potential relaxation back to the 1-year average.
The 30-day realised volatility is trading at median values, consistent with volatility expectations.
Call skew remains high, showing little interest in fading the move.
BTC dominance peaked at 60.5% on Tuesday and has since eased to 59.8%, indicating some rotation out of BTCUSD.
Altogether, I believe markets need some time to digest the current price action.
Among the standout assets, I continue to highlight two clear winners: SOL and ETH.
SOLUSD is trading at USD 200 at USD 93 billion MC up 26% since Tuesday, while ETHUSD is trading at USD 2,920 with a market cap of USD 350 billion, up 21% since Tuesday.
With the ETHBTC ratio still below 0.04, it is worth noting that an ETHBTC ratio of 0.05 (2022’s bottom) would imply an ETHUSD price of USD 3,800—still far below the March highs.
Solana, meanwhile, continues to show strength across the board, with a steady buy-bias from our client base.
With a Republican President, Senate, and Supreme Court, could this be the beginning of a “golden age” for crypto regulation?
Trump has made several promises regarding crypto, though in my view, many have yet to be fully priced in by the market.
That said, these changes will likely take time to materialise.
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