OTC Weekly Trading Insights (11/08/2024)

Top Interest of the Week

• Uniswap ($UNI) experienced a significant surge following Trump's electoral victory, with its price climbing from $7.19 to $9.62 within a day. The Republican Party's sweeping success in the 2024 US elections instilled confidence in the decentralized finance sector as investors anticipated a more defined regulatory environment for cryptocurrencies. Additionally, Uniswap's impressive trading volume of $2 trillion on the Ethereum network underscored its influential role in the decentralized finance landscape.

• Dogecoin ($DOGE) surged by over 20% on Tuesday as Donald Trump moved closer to victory. Supporters of Dogecoin perceive Trump's win as a substantial boost for the meme coin, anticipating increased media attention surrounding the tech billionaire Elon Musk and his proposed Department of Government Efficiency, cleverly abbreviated as DOGE.

• Bitcoin ($BTC), which commands 60% of the total cryptocurrency market capitalization, also rallied following Trump's declaration of victory in the 2024 US presidential election. Our analysis noted a significant influx from the ETF sector on Wednesday morning as investors sought greater exposure to Bitcoin via the Bitcoin ETFs. Furthermore, BTC reached a new all-time high on Thursday after the Federal Reserve announced a 25 basis point rate cut, complemented by a dovish speech from Fed Chair Powell.

Overall Market

• The above chart shows the BTC price movement in the 8-hour chart across 2024.

• BTC experienced a significant surge on Tuesday night as the results of the 2024 US election were revealed. Donald Trump and the Republicans garnered more support than anticipated, defying the predictions of the polls. While the polls indicated a tight contest between Trump and Harris, Trump successfully flipped key states like Georgia, Pennsylvania, and Wisconsin, securing a majority of the electoral college votes. As the odds of Trump's victory increased, BTC's price climbed higher and reached 76,400 mark on Wednesday, bolstered by strong ETF inflows during the US trading session.

• Additionally, the Federal Reserve announced a 25 basis point rate cut on Thursday, with Fed Chair Powell delivering a dovish speech that indicated a decline in US inflation and a plan to continue gradual rate cuts in the coming year. This dovish outlook propelled BTC to a new all-time high of 76,849.99 USDT on the spot market today.

• The recent rate cuts by the Federal Reserve and other central banks indicate a trend towards increased global liquidity. In the United States, the Republican's significant victories in the recent elections imply that a clearer legislative framework for cryptocurrency is expected to emerge over the next four years. Additionally, with Donald Trump's commitment to positioning the United States as a central hub for the cryptocurrency industry, a more favorable environment for crypto is anticipated.

• The chart indicates a distinct breakout-retest-resume pattern for BTC price. Our analysis suggests that BTC will maintain its upward trajectory through the end of the year after a seven-month consolidation. While we anticipate some significant pullbacks along the way, we are confident that the upward momentum remains strong, and we expect the price to hit the $80k level before Christmas.
  

Options Market

• The above chart is the 25-delta skew on BTC and ETH options with different durations.

• Last week, we observed an unusually high implied volatility (IV) for BTC and ETH coinciding with the 2024 US elections. We advised taking a short position on the elevated IV of short-dated options to fund long-dated options. On election day, the implied volatility for the BTC 1-day expiry option surged to 122%, but it swiftly returned to the usual 50-60 range after Trump's victory announcement, which indicated he had secured three key swing states.

• At present, market sentiment is notably optimistic about BTC's short-term price trajectory, reflected in a 7-day skew of 4.79 and a 30-day skew of 4.12. This suggests that options traders are expecting a significant price increase for BTC in the coming month.

• However, the 60-day skew and longer-term skews are considerably lower than the 7-day skew, which could indicate a potential reversal or pullback. With the current implied volatility hovering around the 50 range, we anticipate that any pullback will likely be minor. As long as the longer-dated skews remain above zero, the long-term bullish outlook will persist, and we can expect BTC's price to rise further after any near-term pullback.

Macro at a glance 

• Last Thursday (24-10-31)

  • Eurozone Consumer Price Index (CPI) was anticipated to experience a monthly increase of 0.3% in October, rebounding from a decline of 0.1% observed in September. The annualized CPI rose to 2.0% in October, up from 1.7% in September, surpassing the expected rate of 1.9%. Additionally, the core CPI in the Eurozone recorded a growth of 2.7% in October, exceeding market estimation.

  • In the US, the Personal Consumption Expenditures (PCE) price index, the inflation index measured by the Federal Reserve, saw an annualized increase of 2.1% in September, down from 2.3% in August. However, the core PCE price index showed growth of 2.7%, which was above the estimated increase of 2.6%.

  • Initial jobless claims in the US continued their downward trend, with only 216,000 claims filed this week, which is lower than the anticipated figure of 229,000.

  • The Chicago Purchasing Managers' Index (PMI), an important indicator of the manufacturing sector's economic health in the Chicago area, reported a significant decline, falling well short of expectations. The actual PMI was recorded at 41.6, indicating a contraction within the manufacturing sector.

• Last Friday (24-11-01)

  • The US nonfarm payroll reported a surprising small number, with only 12,000 occupancies added in October, which missed the market expectation of 113k by a wide margin.

  • The US unemployment rate remained the same in October, at 4.1%. 

• On Tuesday (24-11-05)

  • Australia's central bank maintained its interest rates at 4.35% on Tuesday, as anticipated, and indicated that a restrictive policy would need to persist for an extended period, implying that borrowers should not expect any Christmas relief this year. 

  • The ISM non-manufacturing PMI, an important measure of the health of the non-manufacturing sector, performed better than expected. The PMI was reported at 56.0, which is higher than the forecast of 53.8 and an increase from last month's 54.9. This suggests that the non-manufacturing sector is growing, as a reading above 50 percent indicates expansion.

• On Wednesday (24-11-06)

  • Donald J. Trump flipped key swing states and won the 2024 US election. Equities and cryptocurrencies surged in response to this bullish news.

• On Thursday (24-11-07)

  • The Federal Reserve cut rates by 25 basis points in November, which matched what the market expected. Fed Chair Powell highlighted that the decision to cut rates was grounded in data, expressing confidence in the US economy despite inflation figures being slightly above projections in September.

Convert Portal Volume Change

• The above table shows the volume change on our Convert Portal by zone. 

• BTC reached a new all-time high of 76,400 USDT on Wednesday, following Donald J. Trump's announcement of his victory in the 2024 US election. The next day, BTC set another record, climbing to 76,849.99 USDT in the spot market after the Federal Reserve announced a 25 basis-point rate cut and a dovish address from Fed Chair Powell. This bullish trend, spearheaded by Bitcoin, lifted the entire cryptocurrency market, with meme coins like $DOGE and $PEOPLE experiencing a surge in demand.

• In the Proof of Work (POW) sector, the increase in trading volume was mainly driven by a surge of interest in Bitcoin ($BTC) and Dogecoin ($DOGE). Our team observed a strong demand for both cryptocurrencies beginning Tuesday, coinciding with the 2024 US election day.

• The Payments sector also saw a notable 23.3% rise in trading volume, primarily propelled by the robust demand for Bitcoin ($BTC). 

• Additionally, the Meme sector experienced a significant boost in trading activity, increasing by 12.7%, with Dogecoin ($DOGE) playing a major role in this growth.
  

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