AD Derivatives Newsletter: Trump's Election Win, Market Impacts & Crypto Surge

USA Week Ahead (ET):

1. Monday - Veteran’s Day (Bond Market Closed)

2. Tuesday - Various Fed Speakers during the day

3. Wednesday 8:30a - CPI

4. Wednesday - Various Fed Speakers during the day

5. Thursday 8:30a - PPI

6. Thursday 3p - Powell Speaks

7. Friday 8:30a - Empire State manufacturing survey

Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.

Authors have holdings in BTC, ETH, and Lyra and may change their holdings anytime.

MACRO - PRESIDENTIAL ELECTION

The massive driver behind the markets last week (both Crypto and TradFi) was the decisive election outcome for Donald Trump!

This was not only decisive but one of the biggest history breaking election waves. Trump won the Electoral College, the Popular Vote, the Senate and likely the House. 

As a result the market was finally able to relax, as the risk of a contentious and contested election disappeared. 

Chart: VIX index (ThinkOrSwim/Schwab)

Chart: VVIX index (ThinkOrSwim/Schwab) 

The equity volatility VIX index gapped down from 20.50 → 16 Tuesday close to Wednesday open. 

Likewise, the VVIX (volatility index of volatility options) gapped down 25pts from 115 → 90 between Tuesday and Wednesday. 

This timing is perfect for lower volatility and higher equities going into the bullish Q4 December seasonality. 

Exciting stuff for the market! 

FED

After cutting rates by a quarter point on Thursday—following a previous half-point cut in September—the Fed has left the market uncertain about future cuts, with only a 25% chance of another rate cut in December.

The Fed's September projections anticipated gradual rate cuts, targeting between 3.25% and 3.5% by late 2025. But market sentiment now reflects the possibility that rates could remain near current levels until at least mid-2025.

Fiscal policies under President-elect Donald Trump, like potential tariffs and immigration changes, could complicate the Fed’s decisions by impacting inflation and growth.

The U.S. now commands a larger share of output among wealthy nations, bolstered by strong post-pandemic growth, a strong dollar, and increased productivity, while China’s growth has slowed and Europe’s economy is contracting. This shift enhances Trump’s leverage in trade policy, especially with his proposed tariffs of 60% on China and 10-20% on other countries.

CRYPTO

Standard Chartered projects that the Republican sweepwill bring substantial changes that could boost the crypto market cap from USD $2.5 trillion → $10 trillion by the end of 2026. Here are the main expected developments:

1. Repeal of SAB 121: Removing the SEC guidance that restricts US banks from crypto custody would allow banks to offer more crypto services, encouraging greater institutional adoption.
2. Stablecoin Regulation: With Republican control, stablecoin legislation could advance, offering regulatory clarity and fostering stablecoin growth as a validated asset class.
3. SEC Leadership Changes: Trump has pledged to replace SEC Chair Gary Gensler, likely resulting in a more favorable regulatory environment for crypto assets.
4. Potential Bitcoin Reserve: Trump has mentioned creating a Bitcoin reserve, a move that could boost Bitcoin’s price significantly, although this remains a low-probability event.

Analysts like Geoffrey Kendrick from Standard Chartered foresee targets of $90,000 and potentially $100,000 by December.

This could conflict with the gamma profiles currently observed in the markets. 

We see a lot of traders owning optionality up to the $90k handle for Nov 29th and Dec 27th. 

But the $90k-$100k+ range has been sold to dealers… Should the market get there, we might see prices struggle, unless sentiment shifts further bullish.

It will be interesting to see how option positioning shifts through the week. 

BTC: $80,218 (+17.4% / 7-day)

ETH :$3,211 (+31.2% / 7-day)

SOL :$210.90 (31.7% / 7-day)

Crypto Overview

As mentioned earlier, analysts are expecting continued bullish follow through into EOY. 

Looking at the charts below (taken from a ZeroHedge article) there’s a lot of hope and historical precedent for a continued EOY rally.

Something interesting to consider is the rally in SmartContract L1s such as Ethereum and Solana. 

The regulatory environment is likely to become much friendlier for DeFi, NFTs, RWAs and Gaming. Protocol development, usage and VC investing will likely grow interest in the Web3 space. 

This could cause the ETH underperformance to turn around.

One caveat, is that the BTC reserve theme is likely going to pickup steam and that’s likely going to make BTC exclusively more attractive. Something to think about!

Ethereum carrie a +10% IV premium over Bitcoin, this is could easily be exceeded if ETH finally catches up lost ground to BTC. 

Volatility in an interesting buy now. 

The election volatility premium has gone away but there enthusiasm for the market has picked up substantially and the drift component for the direction is very strong. 

Last week we noted the Nov29th 80-90k Call spreads paying 10-to-1. Those are good holds. 

More upside optionality seems interesting in my opinion, there’s momentum and strong fundamental reasons for this market to melt-up! 

Especially since SPOT ETFs have provide investment avenues to the Traditional Market players who were previously locked-out of BTC investments before. 

EOY DEC 27th $100k options are pricing 8% Probability. 

March Expiration $100k options are pricing 20% Probability. 

Another underestimated trade, which can be structured to pickup delta in a “safe” way, is basis expansion. 

There’s a lot of room for long-dated basis to expand in a continued bullrun as the market pays a premium for long leverage. 

This type of trade is interesting because it’s has a smooth “path” than owning leveraged long exposure which can be “shaken out”. 

Long-dated call options will benefit from basis expansion as well, but traders must make sure the Risk-Reversal hasn’t already been priced too bullishly. 

Paradigm's Week In Review

Paradigm Top Trades This Week

Weekly BTC Cumulative Taker Flow

Weekly ETH Cumulative Taker Flow

BTC Cumulative OI

ETH Cumulative OI

BTC

ETH

• BTC ATM IV has fallen post-election, currently at 49% (30 DTE) and 51% (7 DTE). 
• The ETH skew has sharply risen, currently sitting at 14% (7 DTE) and 9% (30 DTE). 
• $105K done in fees!

AMBERDATA DISCLAIMER: The information provided in this research is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information in this report constitutes, or should be relied on as a suggestion, offer, or other solicitation to engage in, or refrain from engaging, in any purchase, sale, or any other investment-related activity. Cryptocurrency investments are volatile and high risk in nature. Don't invest more than what you can afford to lose.