The "Trump trade" has sparked a new surge in the markets, with Bitcoin reaching an all-time high of $88,000 for the first time, Tesla stock rebounding 39% since Election Day, and the dollar rising to a four-month high.
Following Trump's victory last week, along with the Republican Party securing control of the Senate and growing prospects of taking control of the House, capital markets have remained exuberant.
The U.S. dollar index surged 0.5% overnight, hitting levels not seen since the day after the election and marking a four-month high. This surge has led to a broad decline in non-dollar currencies, with the euro dropping more than 0.6% against the dollar, briefly touching $1.063, its lowest level since April. The dollar also strengthened against the Japanese yen, rising 0.70% to 153.71 yen, continuing its upward trend throughout the day.
Bitcoin on a Tear, Heading Toward $100K Milestone
Bitcoin has been unstoppable, soaring more than 10% overnight to exceed $88,000 for the first time. Since the election, Bitcoin's price has surged by over 30%, hitting new record highs nearly every day.
The entire cryptocurrency market is riding high, as Bitcoin's price rise has fueled optimism around smaller tokens like Dogecoin as well. Cryptocurrency-related stocks also saw substantial gains, with Bitcoin proxy company MicroStrategy rising 26%, cryptocurrency exchange Coinbase climbing nearly 20%, and mining companies Mara Holdings and Riot Platforms increasing by 29% and 17%, respectively.
Chris Newhous, head of research at Cumberland Labs, stated that Bitcoin continues to surpass expectations, setting new highs. He believes the market is finally realizing that we are entering an undeniable bull market for the cryptocurrency sector in the coming years.
Investors are betting that Trump's policies will benefit the cryptocurrency industry. David Bailey, organizer of the Bitcoin conference and CEO of BTC Inc., noted that Trump's victory, coupled with the likelihood of the Republican Party's success, presents a unique opportunity for transformative legislation. He suggested that the U.S. is poised to become the world's powerhouse for Bitcoin and cryptocurrencies.
With Republicans potentially controlling both chambers of Congress, the expectation is that Trump's administration will support the cryptocurrency sector, providing more power to enact favorable legislation, including efforts to create a national Bitcoin reserve, which Trump and his allies have previously expressed support for.
Looking ahead, Bitcoin options traders are already setting their sights on the $100,000 milestone. According to data from cryptocurrency options exchange Deribit, investors are increasingly betting that Bitcoin will hit this mark by the end of the year. As of Monday morning in London, there were open contracts worth approximately $780 million in Bitcoin, with traders betting that the cryptocurrency will reach $100,000 by December 27. Deribit estimates the chances of this happening at 18.6%.
Tesla Rockets 39% in What Some Call a 'Ridiculous' Rebound
Tesla shares have surged by 39% since Election Day, adding over $300 billion to the company's market capitalization as investors jumped back in. The stock's rebound has been called nearly "ridiculous" by market professionals.
Tesla is viewed as a classic "momentum stock," with its price moving rapidly in either direction based on shifts in investor sentiment. Steve Sosnick, chief strategist at Interactive Brokers, explained that with Musk's victory supporting Trump, Tesla stands to benefit from the president-elect's policies. He added that the surge in Tesla's stock was fueled by market enthusiasm for buying the dip and chasing gains, often using leverage or options to do so.
Options traders are betting that Tesla stock will continue to climb, with three-month call options trading at their highest premium to put options since early 2021. Analysts are projecting that Tesla's stock could break its all-time intraday high of $414.50, a level reached during the pandemic when retail investors drove up the price of popular stocks.
Wedbush analyst Daniel Ives remarked that Trump's return to the White House could "transform" Tesla's autonomous driving and artificial intelligence business. Ives raised Tesla's price target from $300 to $400, citing the potential for policy changes that could benefit the company.
