- Last week, Bitcoin topped 80,000 USD for the time ever bolstered by the prospects of a more favourable regulatory environment in the US amid Trump’s US election victory.
- Our in-house “Cryptoasset Sentiment Index” currently signals a very bullish sentiment. The index has increased to the highest level in 3 years.
- Both daily US spot Bitcoin ETF inflows as well as global crypto ETP inflows reached their highest level ever recorded amid the favourable US election results.
Chart of the Week
Performance
Last week, Bitcoin topped 80,000 USD for the time ever bolstered by the prospects of a more favourable regulatory environment in the US amid Trump's US election victory.
The Republicans have secured the presidency, the majority in the senate and most likely also the majority in the House. What is more is that there is a significant majority of congressmen and senators who are now pro-crypto. According to data provided by https://www.standwithcrypto.org/races, 268 pro-crypto congressmen have been elected which makes this House the most pro-crypto congress ever.
We have outlined the key implications shortly after the US election in more detail in our latest Crypto Market Espresso.
However, we would like to reiterate the most important points here:
- A more pro-crypto stance among US regulators will likely allow a more diverse set of investment opportunities such as ETFs. There are still several spot crypto ETFs waiting for the SEC's approval including spot ETFs on Solana, and XRP.
- Cryptoasset service providers will be freer to operate and will likely face less pressure by regulators, i.e. the so-called “Operation Chokepoint 2.0” will likely end.
A decline in US regulatory uncertainty could be a real game changer towards higher adoption of cryptoassets among investors as both surveys among US financial advisors as well as institutional investors in general indicate that “regulatory concerns” used to exhibit the biggest obstacles to investment.
Moreover, Trump has made several positive election promises, including the following:
- Establish a strategic national Bitcoin stockpile
- Establish favourable regulation to encourage domestic Bitcoin mining (“Bitcoin made in the USA”)
- Install a Bitcoin/crypto advisory council in the first 100 days in office
- Replace SEC chief Gary Gensler who is rumoured to be critical of cryptoassets
As a result, cryptoassets have rallied strongly following the US election results and bitcoin has reached new all-time highs.
This was supported by a strong acceleration in global crypto ETP flows. Both daily US spot Bitcoin ETF inflows as well as global crypto ETP inflows reached their highest level ever recorded amid the favourable US election results (Chart-of-the-Week).
In addition, the Fed's latest interest rate cut also supported a continued return in risk appetite. More specifically, the Fed cut its benchmark rate by 25 bps as expected which is the 2nd interest rate reduction this year. At the time of writing, Fed Funds Futures traders only price in 1 additional cut until year-end which is significantly less than expected after the first rate cut in mid-September.
In fact, US 10yr yields have increased by more than +50 bps since the Fed started its rate cutting cycle in anticipation of a slower pace of rate cuts amid the Chinese reflation and the expectation of looser US fiscal policy due to Trump's election victory. This has somewhat counteracted the Fed's efforts to ease monetary policy as financial conditions have significantly tightened despite rate cuts.
The latest increase in yields certainly increases downside risks to the US economy via continued strains on the housing market. It is worth highlighting that the latest increase in yields could also be due to a general increase in sovereign default risks which could benefit counterparty risk-free assets like Bitcoin as outlined in our latest Bitcoin Macro Investor report.
Another important development that supported the recent rallye to new all-time highs in bitcoin were rumours of secret nation-state investments into bitcoin.
With the recent US election victory of Trump, the US has technically become the single biggest sovereign holder of Bitcoin overnight. At the time of writing, the US government controls around 208k BTC according to data provided by Arkham.
It is expected that other sovereign nations could follow suit, especially if the “Bitcoin Bill” and the proposed “Bitcoin Purchase Program” proposed by Wyoming's senator Cynthia Lummis would be enacted.
Other reasons for the recent rise to new all-time highs include potential bitcoin purchases by Michael Saylor's Microstrategy as well as significant bitcoin futures short liquidations which spiked to the highest level since late February 2024.
In general, among the top 10 crypto assets, Dogecoin, Cardano, and Shiba Inu were the relative outperformers.
The decline in US regulatory uncertainty has generally led to a sharp rallye in altcoins, especially in memcoins such as Dogecoin and Shiba Inu.
Sentiment
Our in-house “Cryptoasset Sentiment Index” currently signals a very bullish sentiment. The index has increased to the highest level in 3 years.
This implies that a pull-back in prices in the short term is increasingly likely.
At the moment, 12 out of 15 indicators are above their short-term trend.
Last week, there were significant reversals to the upside in both BTC perpetual funding rates as well as BTC futures basis rate which signal increased risk appetite among BTC perpetual and futures traders.
The Crypto Fear & Greed Index signals an “Extreme Greed” level of sentiment as of this morning.
Performance dispersion among cryptoassets has declined significantly. This signals that altcoins have become more correlated with the performance of Bitcoin.
Altcoin outperformance vis-à-vis Bitcoin has increased significantly last week, with around 80% of our tracked altcoins managing to outperform Bitcoin on a weekly basis. This was consistent with a strong outperformance of Ethereum vis-à-vis Bitcoin last week.
In general, increasing (decreasing) altcoin outperformance tends to be a sign of increasing (decreasing) risk appetite within cryptoasset markets and the latest altcoin outperformance signals a significant increase in risk appetite at the moment.
Meanwhile, sentiment in traditional financial markets as measured by our in-house measure of Cross Asset Risk Appetite (CARA) has also been boosted by the US election results last week. The index is currently signals a bullish cross asset risk appetite.
Fund Flows
Weekly fund flows into global crypto ETPs have continued to be very high and daily inflows into both global crypto ETPs as well as US spot Bitcoin ETFs have reached a new all-time highs last week (Chart-of-the-Week).
Global crypto ETPs saw around +1,963.6 mn USD in weekly net inflows across all types of cryptoassets which is only a slight deceleration compared to prior week's +2,130.7 mn USD in weekly net inflows.
GlobalBitcoinETPs saw net inflows totalling +1,812.5 mn USD last week, of which +1,644.4 mn USD in net inflows were related to US spot Bitcoin ETFs alone.
The Bitwise Bitcoin ETF (BITB) in the US also saw very positive net inflows, totalling +76.7 mn USD last week.
In Europe, the ETC Group Physical Bitcoin ETP (BTCE) also saw minor net inflows equivalent to +0.2 mn USD, while the ETC Group Core Bitcoin ETP (BTC1) also experienced slightly positive net inflows (+0.4 mn USD).
Outflows from the Grayscale Bitcoin Trust (GBTC) decelerated somewhat, with around -25.4 mn USD in net outflows last week. The iShares Bitcoin Trust (IBIT) continued to see massive net inflows of +1,251.1 mn USD, albeit a bit lower than last week.
Meanwhile, flows into globalEthereumETPs turned very positive with around +131.4 mn USD in net inflows, after -18.4 mn USD in net outflows the week before.
US Ethereum spot ETFs also saw around +154.7 mn USD in net inflows in aggregate. The Grayscale Ethereum Trust (ETHE) continued to see net outflows of around -10.8 mn USD last week which were more than offset by higher net inflows into other ETFs.
The Bitwise Ethereum ETF (ETHW) in the US also saw decent net inflows of +10.0 mn USD last week.
In Europe, the ETC Group Physical Ethereum ETP (ZETH) also experienced small net inflows of +0.6 mn USD while the ETC Group Ethereum Staking ETP (ET32) experienced one of the best weeks on record with +11.0 mn USD in net inflows.
Altcoin ETPs ex Ethereum also saw minor net inflows with around +10.5 mn USD last week.
Thematic & basket crypto ETPs also attracted some capital with around +9.2 mn USD in net inflows on aggregate last week. The ETC Group MSCI Digital Assets Select 20 ETP (DA20) saw sticky AuM (+/- 0 mn USD).
Meanwhile, global crypto hedge funds slightly reduced their exposure to Bitcoin last week. The 20-days rolling beta of global crypto hedge funds' performance to Bitcoin decreased to around 0.64 per yesterday's close.
On-Chain Data
In general, Bitcoin on-chain metrics were relatively strong amid record daily net inflows into US spot Bitcoin ETFs.
For instance, Bitcoin spot intraday net buying volumes on exchanges have accelerated significantly. More specifically, over the past 7 days, bitcoin spot exchanges saw +1,671 mn USD in net buying volumes – the highest level since March 2024.
In fact, whales have become net accumulators of bitcoin more recently judging by BTC whale net exchange transfers. More specifically, BTC whales have sent -17.4k BTC off exchange last week after having sent the highest amount since July 2024 to exchanges prior to the US election.
Whales are defined as network entities that control at least 1,000 BTC. This also exerted significant upside pressure on prices.
BTC miners have also remained on the sidelines so far and have sent little bitcoins to exchanges which has also supported the recent rise to new all-time highs.
Meanwhile, short-term holders continued to take profits as bitcoin reached new record all-time highs. However, this was more related to smaller investors taking profits.
That being said, profit-taking by long-term holders has increased to the highest level since July 2024 which tends to be a negative signal for the market. Coin days destroyed (CDD) – which weighs coins spent by the amount of time they have been held – has also spiked to the highest level since July 2024.
All these factors imply increased downside risks in the short term amid elevated sentiment.
Futures, Options & Perpetuals
Last week, BTC futures open interest reached a new all-time high in USD-terms with around 39.8 bn USD in open interest. Open interest on CME also approached its previous all-time highs in BTC-terms.
Nonetheless, BTC futures short liquidations increased to the highest level since late February amid the rise above previous all-time highs. They still remained elevated over the weekend suggesting that the very latest increase above 80k USD in bitcoin was also largely fuelled by forced futures liquidations.
Meanwhile, BTC perpetual funding rates increased significantly to the highest level since March 2024 suggesting elevated sentiment among BTC perpetual traders.
When the funding rate is positive (negative), long (short) positions periodically pay short (long) positions. A positive funding rate tends to be a sign of bullish sentiment in perpetual futures markets at the moment.
The BTC 3-months annualised basis also continued to rise hitting the highest level since June 2024 of around 13.3% p.a.
Besides, BTC option open interest also increased significantly last week and approached the all-time highs from March 2024 in USD-terms.
This was probably both related to an increase in puts and calls as the put-call open interest ratio remained relatively stable.
However, the 1-month 25-delta skews for BTC declined slightly last week, signalling an increased appetite for call options. At the time of writing, the 1-month skew is still significantly more biased towards call options with a premium of around 6% p.a. for delta-equivalent calls.
BTC option implied volatilities drifted sharply lower, despite the fact that 1-month realized volatility increased. This is most likely due to the fact that short-dated options have been unwound with the decrease in US election hedging activity.
At the time of writing, implied volatilities of 1-month ATM Bitcoin options are currently at around 52.7% p.a.
Bottom Line
- Last week, Bitcoin topped 80,000 USD for the time ever bolstered by the prospects of a more favourable regulatory environment in the US amid Trump’s US election victory.
- Our in-house “Cryptoasset Sentiment Index” currently signals a very bullish sentiment. The index has increased to the highest level in 3 years.
- Both daily US spot Bitcoin ETF inflows as well as global crypto ETP inflows reached their highest level ever recorded amid the favourable US election results.
Appendix
