Last week, the market was relatively calm, and risk appetite continued. The US stock market, US Treasury yields, US dollar exchange rate, gold and BTC prices were all close to mid-term or year-to-date highs. The US economic data was strong, with retail sales higher than expected (actual monthly increase of 0.6%, control group monthly increase of 0.7%), and the number of unemployment claims remained stable, which continued to support the narrative of a soft landing.
The performance of the earnings season also favored the market. The results of the US banks, Netflix and TSMC (up 9.8%) all exceeded expectations. The SPX index rose for 6 consecutive weeks, setting a record for its best consecutive rise this year. Investors remain confident in the market and corporate profits. The implied earnings day volatility of options is about 5% lower than the recent average.
The focus of late has naturally been on the US election, with a lot of discussion lately about the divergence between Polymarket’s forecast (Trump’s chance of winning is 60%) and traditional forecasts (still close to 50/50). Regardless of the details, macro asset trading may be heading into November with a Trump win in mind, as bond traders generally expect Trump to be more aggressive in pushing fiscal spending in his second term, and the recent trend in US Treasury yields has shown a very high correlation with Trump’s chances of winning.
BTC seems to be waking up from a long slumber, breaking out of its downward channel and seeking to challenge all-time highs before the election. The price recently broke through $68,000, while ETFs have seen inflows of about $2.4 billion in the past six trading days, and BTC futures open interest has also surged accordingly, which may be a positive indicator that the market is establishing new long positions.
It is encouraging that the increase in BTC inflows coincides with a significant increase in Chicago Mercantile Exchange (CME) derivatives trading activity, with CME futures open interest exceeding $11.5 billion, reaching an all-time high. In addition, according to K 33s research, the growth in CME open interest was driven by direct participants rather than leveraged capital inflows, which presents a healthier bullish structure and a more aggressive buying tendency. In addition, considering that traditional financial (TradFi) participants are mostly restricted from trading on centralized exchanges, the surge in CME trading activity also indicates the participation of more mainstream and TradFi participants.
The market is currently focused on the US election. For cryptocurrencies, the most favorable outcome is that Trump wins and the Republicans sweep both the Senate and the House, giving the Trump/Vance-supported digital asset reform plan a chance to pass Congress. The second is that Trump wins but Congress is divided, and the reform plan may encounter some resistance from the House Financial Services Subcommittee, but current senior congressman Maxine Waters has previously urged the inclusion of stablecoin legislation in the National Defense Bill.
On the other hand, if Harris is elected but Congress is split or controlled by Republicans (the probability of a Democratic sweep is low), it will bring more uncertainty. Harris has not yet elaborated on any policy goals related to cryptocurrencies, only saying that he wants to encourage innovative technologies such as AI and digital assets. Lets keep watching!
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