Bitcoin Celebrated MAGA’s Comeback with a Fresh All-Time High

• BTC set a new all-time high following Trump’s election night victory
• IBIT reached $4.1 billion in daily trading volume after Trump’s win
• Deribit enabled stETH for cross-collateral use

BTC hits new ATH, mixed ETF flows, major DeFi tokens outperform

Crypto markets echoed the risk-on sentiment observed in TradFi assets, with the total crypto market cap holding above $2.5 trillion and bitcoin dominance increasing to 59.4%. Bitcoin led blue-chip assets as it printed a fresh all-time high this week, climbing 4.6% from the previous week, while ether recorded a modest 2.5% weekly gain.  

In the spot ETF universe, bitcoin ETFs experienced two-way flows over the past 5 trading days, with net daily outflows leading up to the election result. However, a significant inflow of $621.9 million was recorded immediately following the outcome. Ether ETFs continued to face challenges in attracting significant fresh inflows, showing a mix of net outflows and a rotation of flows from Grayscale’s ether ETF to other ether ETFs, with the majority shifting to BlackRock’s ETHA ETF.

Since its inception, ETHA has accumulated $1.35 billion in net inflows, while Grayscale’s ether ETF has recorded cumulative net outflows of $3.12 billion. While ether posted a modest weekly gain, Lido stood out with a 19.2% rally from the previous week. Lido DAO, a decentralized autonomous organization, allows users to stake ether and earn daily rewards while retaining full control of their staked tokens. Users deposit ether into a smart contract, which is then locked into the Ethereum proof-of-stake deposit contract.

Most of Lido's gains followed a blog post revealing that Deribit would accept stETH for cross collateral margin mode. Launched in June, Deribit's cross collateral mode allows traders to use currencies other than the settlement currency as margin for open positions or orders on derivative products. This integration enables users to use stETH as margin across Deribit's derivative products, including options, futures, and perpetual contracts. By using stETH as collateral, users can maintain their ethereum staking rewards while leveraging their assets for active trading without sacrificing those rewards.

Among other major DeFi tokens, Uniswap, the leading DEX, saw its price rally by 14.8% week on week, marking a nearly 100% increase from its August lows. According to DeFi Llama, Uniswap now leads the entire DEX universe in traded volume. Over the past seven days, Uniswap recorded more than $14 billion in volume, surpassing Raydium, which saw $8.5 billion in turnover during the same period. Raydium had been the most active DEX last month.

Within the DeFi borrowing and lending space, Aave posted impressive weekly gains of 11.1%. Speculation around Aave’s price may have been positively impacted by its partnership with World Liberty Financial, a project linked to newly elected President Trump.  On October 9, World Liberty Financial submitted a proposal to AaveDAO seeking approval to launch its platform as an instance on Aave V3. As part of its integration with Aave, World Liberty Financial also proposed sharing 20% of its transaction fees and 7% of its governance token supply (WLFI) with AaveDAO.

It feels like tears are gone with the rain, is the pain truly over?

During this election cycle, the crypto community contributed millions of dollars in various campaigns nationwide, aiming to highlight crypto as a key voter issue and support candidates aligned with its interests.  By Wednesday morning, the industry saw most of its efforts pay off. Republican Donald Trump, an outspoken advocate for bitcoin this year, secured a decisive victory over Democratic contender Kamala Harris.

The crypto community now believes that under Trump's administration, regulation of the crypto industry will become more business-friendly, with a supportive Congress likely to pass legislation that gives the industry more room to grow.

Additionally, crypto-backed political action committees (PACs) achieved significant success in both the House and Senate elections, with a standout victory in Ohio, where Republican Bernie Moreno triumphed over crypto critic Sherrod Brown.

Trump had said he would remove Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), who has filed numerous lawsuits against crypto projects for allegedly violating securities laws. Gensler is widely criticized in the crypto industry, with many accusing him of stifling innovation. In defense, Gensler argues that his role is to protect consumers from the significant crypto collapses of 2022, including the failures of Terra Luna and FTX. Markus Thielen, CEO of crypto research firm 10x, offers an interesting hypothesis that the SEC could soon see a new chairman following Trump’s election win.

In his research note, Thielen suggests that historical precedent points to Gensler potentially resigning due to the impending regime change. He draws comparisons to Jay Clayton, who resigned before Biden’s inauguration, and Mary Jo White, who stepped down the day Trump took office. If this pattern continues, Gensler may resign in December or January, with a new SEC chairman possibly confirmed by April or May. The restructuring of the SEC could expedite the approval of new ETF products, including those based on single underlying assets and baskets. This shift may also support in kind creation/redemption processes and open the door for an ether ETF that includes staking rewards.

Following Donald Trump’s victory, the Republicans have gained a strong majority in the Senate, and may achieve the same in the House. As a result, Tim Scott will likely replace Sherrod Brown, a staunch critic of crypto, as head of the Senate Banking Committee. This shift is seen as a major win for the crypto industry, potentially ending the controversial Operation Choke Point 2.0, which has been widely criticized for its adverse effects on the sector. The industry is also optimistic about advancing the stablecoin legislation, with growing anticipation around the bill's potential progress.

Wu Blockchain shared a summary of 10 promises Trump made to the crypto industry over the past year. In his acceptance speech, Trump declared, "I will govern by a simple motto, promises made, promises kept." If he follows through on this, it could bring significant changes to the digital assets space.

While the industry's pain following the FTX collapse may seem to fade with this victory, like "tears in the rain," policy changes often take time to implement and even longer to show their effects.

Macro pulse 

This week, TradFi assets experienced a shift towards risk-on sentiment. Oil futures climbed 4.5% from the prior week, while US equities recorded a 2% weekly gain. The market reacted positively to Trump’s win in the US presidential election, with his proposed tax cuts lifting stocks. Meanwhile, expectations of inflationary pressure from higher spending, and increased issuance strengthened the US dollar, which saw its biggest move since March 2020 yesterday. The US Dollar Index advanced by 1.1%, the 10-year US Treasury yield rose by 17 basis points, and the Gold and Silver Index dropped 6.3% on a weekly basis.

^{*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on November 7, 2024} 

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