U.S. President Donald Trump's Executive Order Sparks Market Sentiment Shift

The signing of an executive order by U.S. President Donald Trump on Thursday to establish a digital asset reserve has sent shockwaves through the cryptocurrency market, with traders expressing disappointment and fear of potential price slides in leading assets such as bitcoin (BTC), ether (ETH), and solana (SOL). According to data tracked by Block Scholes, sentiment remains resilient in XRP, however.

The absence of new purchases in the reserve means that it serves merely as a strategic stockpile at this time, without injecting any buying pressure into the market. This has led traders to chase short-dated put options in BTC, ETH, and SOL, with put option prices trading at a premium relative to calls. A put option offers the buyer the right to sell the underlying asset at a predetermined price at a later date, protecting them from potential price slides.

The phenomenon of upside-down skews, which measure the difference in implied volatility (demand) between lower strike puts and higher strike calls, is evident in short-dated BTC, ETH, and SOL options. This indicates that traders are demanding put options to hedge against potential price falls, a clear sign of downside fears. In contrast, XRP options maintain a positive skew at all tenors longer than one week.

Andrew Melville, research analyst at Block Scholes, provided insights into the market's reaction: "Short-tenor skews for BTC, ETH, and SOL options once again express a demand for puts. April expiries and beyond, however, still maintain a bullish tilt for BTC and ETH, while XRP options hold a positive skew at all tenors longer than 1 week." Melville also noted that derivatives are largely mirroring the market's disappointment following Trump's executive order.

The market is now focusing on Friday's White House crypto summit to bring clarity to the regulatory landscape and institutional sentiment toward digital assets. Key market signals to watch include concrete guidelines on securities laws, the reserve's structure, and hints of legislative backing. Each of these factors has the potential to drive a bullish surge or spark volatility.

The U.S. nonfarm payrolls report for February is also being closely watched, with data expected to show an improved pace of job creations and a steady unemployment rate. A weaker-than-expected reading would validate renewed hopes for at least three Federal Reserve rate cuts this year, potentially supporting risk assets including BTC. However, the sustainability of gains remains under question due to the inflationary impact of Trump's tariffs.

Markus Thielen, founder of 10x Research, provided additional insights: "The interest rate market has shifted expectations, now anticipating three rate cuts this year instead of just one. However, this outlook may be overly optimistic, as the Fed will likely prioritize monitoring Trump's impact on inflation." The process of assessing the inflationary impact could take months or even quarters to fully assess, which may lead the Fed to maintain a neutral stance.

The concept of the "Fed put" – the level at which the Fed would step in to support markets – is also being revisited. Thielen suggested that the "Fed put" could be set lower under Trump than it would be under a Kamala Harris or Joe Biden administration, meaning policymakers may tolerate more market volatility before intervening.

Market Sentiment and Skews

The sentiment in the cryptocurrency market has shifted significantly following Trump's executive order, with traders expressing disappointment and fear of potential price slides. According to data tracked by Block Scholes, short-dated put options in BTC, ETH, and SOL are trading at a premium relative to calls, indicating a demand for puts.

Skews, which measure the difference in implied volatility (demand) between lower strike puts and higher strike calls, have been inverted for most of March. However, at-the-money volatility levels at the front-end have dropped sharply by over 10 points as the market has priced out some uncertainty ahead of Friday's doubleheader of NFP and Crypto Summit.

The phenomenon of upside-down skews is evident in short-dated BTC, ETH, and SOL options, indicating that traders are demanding put options to hedge against potential price falls. In contrast, XRP options maintain a positive skew at all tenors longer than one week.

Friday's White House Crypto Summit

The market is now focusing on Friday's White House crypto summit to bring clarity to the regulatory landscape and institutional sentiment toward digital assets. Key market signals to watch include concrete guidelines on securities laws, the reserve's structure, and hints of legislative backing.

Each of these factors has the potential to drive a bullish surge or spark volatility. The outcomes could significantly influence the regulatory landscape and institutional sentiment toward digital assets, shifting toward clarity on token classification, tax incentives, and reduced enforcement actions.

U.S. Nonfarm Payrolls Report

The U.S. nonfarm payrolls report for February is also being closely watched, with data expected to show an improved pace of job creations and a steady unemployment rate. A weaker-than-expected reading would validate renewed hopes for at least three Federal Reserve rate cuts this year, potentially supporting risk assets including BTC.

However, the sustainability of gains remains under question due to the inflationary impact of Trump's tariffs. The process of assessing the inflationary impact could take months or even quarters to fully assess, which may lead the Fed to maintain a neutral stance.

The "Fed Put"

The concept of the "Fed put" – the level at which the Fed would step in to support markets – is also being revisited. Thielen suggested that the "Fed put" could be set lower under Trump than it would be under a Kamala Harris or Joe Biden administration, meaning policymakers may tolerate more market volatility before intervening.

This shift in expectations raises questions about the sustainability of gains and the potential impact on the cryptocurrency market. The Fed's stance on inflation will likely play a significant role in shaping the market's trajectory in the coming months.

Conclusion

The signing of Trump's executive order has sent shockwaves through the cryptocurrency market, with traders expressing disappointment and fear of potential price slides. However, sentiment remains resilient in XRP, and key market signals to watch include concrete guidelines on securities laws, the reserve's structure, and hints of legislative backing.

Friday's White House crypto summit will bring clarity to the regulatory landscape and institutional sentiment toward digital assets, while the U.S. nonfarm payrolls report for February is expected to show an improved pace of job creations and a steady unemployment rate. The sustainability of gains remains under question due to the inflationary impact of Trump's tariffs.

The concept of the "Fed put" has also been revisited, with some suggesting that the level at which the Fed would step in to support markets could be set lower under Trump than it would be under other administrations. This shift in expectations raises questions about the sustainability of gains and the potential impact on the cryptocurrency market.