Thoughts on the price action of BTC & Gold
Market expectations of a Trump win have risen in polymarkets, though ‘official’ prediction markets are still calling for a 50-50 race though markets are naturally inclined to hedge against a Trump win, along with a lower probability of a congressional red sweep.
I wouldn’t say that people buying 80k calls on BTC to be a bet on higher prices, but is more like a cheap option (implied vol really hasn’t gone up that much) against markets rallying against a friendly administration, red hot equity markets, dovish Fed & PBoC and US economic soft landing. BTC vol skews heavily in favor of higher prices post election, but that has been the case for quite a few weeks now as an election ‘hedge’.
The overall rise in gold is a macro reflection of the current monetary policy trajectory against a strong economy. To be honest, US GDP and labor markets are still very strong by any historical standards, and US CPI is still above the Fed’s long-term target. It honestly is a bit wild that the Fed is as dovish as they are given the absolute levels of where things are. Furthermore, continued strong earnings performance out of banks, tech, Mag7, etc is adding a risk-on feel to all risk assets, and the rise in long-term treasury yields (10y +60bp since September) reflects the market’s bias that a potential Trump will lead to more fiscal largesse and free spending policies which could incur a return of inflation.