Key Indicators: (November 4 4pm -> November 11 4pm Hong Kong time)
BTC/USD price increased by +18.4% ($68,000 -> $81,200), ETH/USD price increased by +27.6% ($2,460 -> $3,140)
BTC/USD year-end (December) ATM volatility decreased by -6.2 points (58.0 -> 51.8), December 25d skewness increased by +0.1 points (3.1 -> 3.2)
After the confirmation of Trump's successor as the next president, the price broke through the $74k resistance level. Between 4pm on Tuesday, November 5 and 4pm on November 8 (Hong Kong time), the price rose 11% to our post-election bullish target range ($76k-$78k). Since then, the upward momentum has continued to strengthen. We remain bullish on BTC and have set a long-term price target above $100k. In the short term, we may see some price volatility or retracement, but the technical fundamentals still support the bullish view.
We believe the current major support level of $74k-$72k will hold, given the possibility of aggressive profit-taking and pullback in the near term market.
Market Themes
The gap between the two leading presidential candidates narrowed before the election, causing a short-term spot market liquidation and a drop to $67k. However, Trump ultimately retained the position of the next president, and the Republicans also successfully gained a majority in both the House and Senate. This has indeed been the fresh catalyst that the cryptocurrency market has been waiting for. After the initial price surge to the $75k-$76k range following the election, the price has continued to march higher, breaking through the key psychological level of $80k over the weekend. Meanwhile, with ETH reclaiming above $3k, other altcoins have also seen significant price increases.
The Fed announced a dovish rate cut on the Thursday night after the election, and the accommodative macroeconomic backdrop continues to support the performance of risk assets by the end of the year. The stimulus policies announced by China on Friday failed to garner market attention, as the market generally believes there is no strong reason to reduce risk assets in the short term. This will also continue to drive up cryptocurrency prices.
Although the USD has strengthened against other fiat currencies (partly driven by the rise in US yields) due to Trump's election, the cryptocurrency price has not reacted to the narratives of supporting crypto regulation and potential strategic reserves. This situation may continue to dominate in the coming months until further confirmation supports more capital inflows.
ATM Implied Volatility
BTC ATM Implied Volatility (November 4 - November 11 4pm Hong Kong time)
The volatility from the election event ultimately ended with a relatively low pricing. In the two days before the event, the market gradually lowered the time-price range to around 5.5%, but the actual daily range on election day was close to 8.5%. The outcome of the election also caught the entire market off guard, as many had expected the race to be more intense and had priced in higher premiums for the mid-to-far term in anticipation of a delayed result. These premiums were ultimately aggressively unwound after the election.
After the election, the implied volatility level has been on a downward trend, mainly due to the market seeing bullish skew (using the traditional call-put spread) and selling pressure as prices gradually moved higher. At the same time, the interest in directional trading through options has been lacking, aside from some rolling of strikes.
With the new administration taking office, there is a structural argument that volatility may weaken. If Trump is able to push through institutional crypto regulation in the US, it could trigger a wave of new capital inflows. This influx of capital would provide support for prices and dampen volatility. Additionally, the actual volatility of the price over the past few months has already declined to the low 40s, further reinforcing this view. However, we note that there is still a long way to go before Trump can get crypto approval through Congress.
Skewness/Kurtosis
Despite the bullish market sentiment, skewness has remained relatively flat this week. It is still the classic upward structure (mainly driven by selling pressure and call-put spread), forming a bullish bias on higher price volatility, which has not been offset by new demand.
The correlation between price and implied volatility has not been well-reflected, which has impacted the skewness and offset the effects of bullish sentiment and downside supply.
Currently, kurtosis is gradually declining, but we believe it has been oversold. While the spot may stabilize in a new local range, it could still explode above $100k or drop below $60k-$65k in the event of certain hedging events.
Wishing everyone a great week ahead!
