OTC Desk Market Update | What Trump’s Election Victory Means for U.S. Markets and Crypto
Welcome back to our weekly market update! Here are the top things we’ll be paying attention to this week:
- Wednesday, November 13th — U.S. Consumer Price Index (CPI) Inflation Report
- Thursday, November 14th — U.S. Producer Price Index (PPI) Inflation Report
- Friday, November 15th — U.S. Retail Sales Report
Macro Update
United States (U.S.)
Trump Trade in Full Effect
Donald Trump was declared the winner of the 2024 U.S. Presidential election late Tuesday night. Trump flipped the states of Wisconsin, Michigan, Pennsylvania, Georgia and Nevada and secured 50.5% of the popular vote to earn a commanding victory. Republicans are also expected to win control of both houses of Congress, meaning that they will have at least 2 years to implement their entire economic and political agenda.
Market reactions were resoundingly positive, making Wednesday the best post-election day stock market performance in U.S. history. The day after Trump’s victory, the S&P 500 stock index rose 2.5%, while the tech-heavy NASDAQ rose 3.0% and the Russell 2000, featuring many small-cap companies, rose a whopping 5.8%. The momentum continued throughout the week, with the S&P 500 rising nearly 5% on a weekly basis and briefly crossing the 6,000-mark before settling at 5,995 points.
On the bond side, Treasury yields originally spiked and prices fell after Trump’s victory was confirmed, but those moves have been pared back and yields now sit relatively unchanged from last week. The 10-year U.S. Treasury yield fell 3 basis points on a weekly basis and closed at 4.31%, while the 2-year yield rose 6 basis points to close at 4.26%.
The biggest move of the week was in crypto, with Bitcoin (BTC) gaining 11.5% this week to a near record high of approximately $77,000 USD. The overall crypto market cap rose from $2.21 Trillion to $2.57 Trillion, adding $360 Billion USD in gains in a week. Inflows into crypto ETFs surpassed $1 Trillion USD in the 3 days following Trump’s election. Donald Trump famously spoke at the Bitcoin 2024 conference and has expressed interest in pro-crypto policies including reduced regulation, support for U.S.-based mining and potentially the creation of a Bitcoin Strategic Reserve.
Fed Cuts Rates in Line with Expectations
The U.S. Federal Reserve delivered a 25-basis point rate cut, bringing the key U.S. interest rate to 4.50%. They had previously cut rates from 5.00% to 4.50% in September. The move was universally expected, with markets pricing in a 96% chance of such an outcome. Further, the prepared remarks by Fed Chair Jerome Powell after the announcement were virtually identical to those delivered in September. Powell stated that his belief is that further rate cuts are likely necessary, but that the Fed will be data-dependent in determining the size of cuts and in determining where the “terminal rate”, at which interest rates are neither stimulative nor constrictive, likely stands. His statement left the door open to any outcome from no cut to a 50-basis point cut at the next Fed meeting in December, but markets are pricing in a 65% chance that the rate will be reduced by 25 basis points.
One other note regarding the Fed is that Donald Trump has said on the record that he intends to let Jerome Powell finish his term, which expires in May 2026, rather than replacing the Fed Chair immediately upon taking office in January 2025.
Canada
Weak Canadian Employment Trends Continue
Statistics Canada’s latest employment report showed continued weakness in the Canadian labor market. Just 14,500 jobs were added nationwide in October, versus expectations of 46,000. The headline unemployment rate remained unchanged at its 3-year high of 6.5% and the participation rate fell to just 60.6%, marking the sixth-straight report with a decline in workforce participation.
Despite a weak headline figure, there were some surprising positives. The unemployment rate for 15-to-24-year-olds, a key demographic group for the future, fell to 12.8% from 13.5%, marking the first time that the measure has improved in the past 7 months. Wages for the permanent, full-time employment group also grew 4.9% year-over-year, vs 4.5% at the last report, suggesting that some consumers may have more spending power in the future.
The key interest rate in Canada currently stands at 3.75%, with the odds of another 50-basis point cut at the Bank of Canada’s (BoC) December 11th meeting currently sitting at 58%. Between now and then, there will be another jobs report for November, plus a gross domestic product (GDP) report and the October inflation figure for the BoC to contend with when making their next decision.
The Week Ahead in Global Macro
Markets will be given plenty of opportunity to confirm or reverse their moves from last week with a data-packed few days ahead. This coming Wednesday, U.S. Consumer Price Index (CPI) data will be released for October. Expectations are for a 0.2% month-over-month increase and a 2.4% year-over-year increase, both figures an exact match to last month’s report. Thursday brings an inflation report on the producer side of the U.S. economy, with the Producer Price Index (PPI) expected to rise 0.2%, after a 0.0% change last month. Then on Friday, October Retail Sales data will be released, with expectations for a 0.4% increase. As always, the composition of data under the hood will be just as important as the headline figures.
Crypto Market Overview
Over the past week, both Bitcoin (BTC) and Ethereum (ETH) have experienced heightened volatility, reflecting broader market uncertainty and dynamic price action. Despite ongoing macroeconomic pressures, both assets have shown resilience, albeit with distinct volatility characteristics. This report provides a detailed analysis of the implied and realized volatility of BTC and ETH, the term structure and skew of their options markets, and the prevailing options flows and positioning. Insights into these metrics offer a comprehensive view of how market participants are adjusting their expectations amid fluctuating price movements.
Implied and Realized Volatility
Over the past week, Bitcoin’s implied volatility has remained relatively stable, hovering around 50% after a sharp drop earlier in the month. While this reflects a degree of market caution, the recent stabilization is indicative of a more consolidated price range for BTC in the short term. Implied volatility has peaked briefly during sharp price moves but has otherwise contracted as market participants anticipate limited near-term directional movement.
Ethereum’s implied volatility has been relatively more subdued than Bitcoin’s, coming in at 45% at the start of the week. ETH’s implied volatility curve has remained flatter, with only mild upticks seen during periods of heightened uncertainty. This suggests that market participants are not expecting any drastic shifts in Ethereum’s price in the immediate term. This lower implied volatility also aligns with a reduction in broader market uncertainty regarding Ethereum’s upgrades and the ongoing development of Ethereum 2.0.
Realized volatility for Bitcoin has been higher than implied volatility for the week, driven primarily by sharp intraday swings. Daily price movements have consistently exceeded expectations, indicating that the market is underpricing some of the short-term risks. The past week’s daily standard deviation of returns averaged 3.2%, significantly surpassing the implied volatility figure, reflecting market participants’ underestimation of Bitcoin’s intraweek volatility.
In contrast to implied volatility, realized volatility for Ethereum has been somewhat higher, with daily price changes averaging 2.8%. Although ETH’s movements have been smaller than BTC’s, the volatility is still notable compared to historical norms. These realized volatility levels indicate that Ethereum is experiencing heightened short-term risk despite a generally stable implied volatility environment.
Term Structure and Skew
The Bitcoin options market is currently exhibiting a steep contango, with implied volatility for near-term expirations (weekly and monthly) significantly higher than for longer-dated contracts. This indicates that investors are pricing in greater uncertainty in the short term, likely due to market events or potential news catalysts in the coming weeks. The forward curve shows implied volatility for 3-month options (at 48%) is slightly lower than for 1-month options (at 52%), which is typical in a market where short-term risks are more pronounced.
Ethereum’s options term structure shows a more balanced curve than Bitcoin’s. Implied volatility across various expiration dates remains relatively steady, with marginal premiums for near-term expirations but no clear contango as seen with Bitcoin. The lack of a pronounced volatility premium in short-dated Ethereum options reflects lower short-term price risk expectations, though this could be subject to change depending on macroeconomic developments or Ethereum network updates.
The skew for Bitcoin options is currently marked by a steep negative slope. Put options, particularly in the short-to-medium term, are trading at a premium relative to calls, suggesting that market participants are hedging against downside risk. This reflects market wariness about potential corrections or black swan events that could disproportionately affect Bitcoin’s price in the short term. As the market shifts between risk-on and risk-off sentiment, the skew remains fluid, with a focus on downside protection.
Ethereum’s volatility skew is similarly negative, but the degree of the skew is less severe compared to Bitcoin. While there is some preference for protective downside puts, it is less pronounced, suggesting a lower fear of sharp price declines. Ethereum’s relatively muted volatility compared to Bitcoin could be due to the growing confidence in its network stability and future upgrades, which are not expected to cause major disruptions in the immediate term.
Options Flows and Positioning
Bitcoin’s options market has seen increased activity in short-term contracts, particularly in the 1-week to 1-month expiry range. Investors are primarily focusing on hedging against potential downside risk, with significant open interest in out-of-the-money (OTM) puts. This indicates that market participants are preparing for further volatility or potential downside movements in the short term. There has also been some interest in longer-dated call options, suggesting that a portion of the market is positioning for a recovery or upside move later in the year, likely tied to broader market trends.
Ethereum options flow has been more neutral, with activity spread across both puts and calls. There is notable interest in mid-term options (1–3 months), suggesting that investors are taking a more measured approach to positioning in ETH. While downside puts still dominate, particularly in the 1-month expiry range, there is also significant demand for out-of-the-money calls, likely driven by the upcoming Ethereum network developments and general optimism around ETH’s long-term growth.
The majority of BTC options positions are concentrated in put contracts, reflecting bearish sentiment in the short term. However, the increasing open interest in longer-dated calls suggests that investors are looking past immediate market turbulence and positioning for a potential rally. The skew and term structure align with these positioning patterns, with short-term downside protection being a key theme.
Like Bitcoin, Ethereum options positioning shows a preference for downside hedging, but the positioning is less one-sided. The relatively balanced flow between puts and calls reflects a market that is uncertain about near-term price action but remains optimistic about ETH’s future growth potential, especially as Ethereum continues to undergo its technological transformation.
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Disclaimer: This article is not intended to provide investment, legal, accounting, tax or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.
