Over the past week, Bitcoin has surged by 13%, capturing the attention of traders and analysts alike.
What’s behind the rally? A growing consensus in the markets that Donald Trump’s 2024 election prospects are improving.
As Bitcoin continues to outperform traditional assets like stocks and gold, it’s clear that investors are betting on a "Trump trade" driven by his pro-crypto policies.
Trump and Bitcoin: A Strategic Partnership?
Donald Trump’s once sceptical stance on cryptocurrencies has done a complete 180.
The former president is now actively campaigning on promises to make the U.S. the global crypto capital, a move that’s been warmly received by the digital asset community.
Bitcoin’s latest surge is being interpreted by some market watchers as an early indication of a Trump victory in the 2024 U.S. presidential election.
Billionaire investor Stan Druckenmiller recently pointed out that Bitcoin, along with bank stocks, are reflecting the market’s belief in a potential Trump win.
Prediction markets like Polymarket have seen Trump’s odds rise to 60%, a substantial increase from earlier in the year. This aligns with Bitcoin’s upward trajectory, as traders begin to view the digital currency as a key beneficiary of a Trump presidency.
Bitcoin Outpacing Other Assets
As of October 17, Bitcoin is trading at around $67,300, nearing its all-time high of $73,798 set in March. In comparison, traditional markets have been relatively flat, with global stock indices and gold showing modest gains.
But why is Bitcoin leading the charge? For starters, inflows into Bitcoin-focused exchange-traded funds (ETFs) have surged, with over $1.6 billion added since October 11.
These ETFs are seen as a safer and more accessible way for institutional investors to gain exposure to the asset, further fuelling the rally.
Prediction Markets and Polls: Diverging Signals
The excitement surrounding Trump’s odds in prediction markets contrasts with the more cautious signals from national polls.
According to the RealClearPolitics average, Kamala Harris still holds a slight edge over Trump, leading by about 1.6 percentage points. However, the race is much closer in key battleground states, where Trump holds a narrow lead.
These conflicting signals add to the market’s volatility, creating an environment where Bitcoin thrives.
The crypto market is no stranger to speculation, and as the U.S. election approaches, we can expect Bitcoin’s price to remain highly reactive to any shifts in political sentiment.
ETFs, Volatility, and Election Bets
Another significant driver behind Bitcoin’s surge is the renewed interest in crypto ETFs. Since mid-October, net inflows into U.S. Bitcoin ETFs have skyrocketed, surpassing $1.6 billion.
This influx of capital, combined with heightened volatility in the prediction markets, has amplified the rally.
Arisa Toyosaki, co-founder of Cega, a crypto derivatives service, notes that "high levels of implied volatility and excitement in prediction markets are driving up spot-Bitcoin prices."
In other words, the more uncertain the election outcome, the more likely we are to see dramatic movements in Bitcoin’s price.
Will Bitcoin Hit New Highs?
With the U.S. election just weeks away, many investors are wondering if Bitcoin can break its previous all-time high.
The current momentum, combined with strong institutional support through ETFs, makes it a distinct possibility. However, as with any market rally, there are risks.
A shift in political sentiment or regulatory pressure could quickly reverse Bitcoin’s gains.
Trump’s rival, Vice President Kamala Harris, has signalled her support for a regulatory framework for cryptocurrencies, though with more safeguards than Trump’s open-arms approach.
Should Harris pull ahead in the polls, we could see Bitcoin’s rally cool off.
What Traders Should Watch
For those keeping an eye on Bitcoin, it’s important to stay updated on the latest polling data, ETF inflows, and market sentiment surrounding the U.S. election.
As we get closer to Election Day, expect more volatility in both Bitcoin and traditional markets.
A Trump victory could push Bitcoin to new highs, while a Harris win might introduce more regulatory scrutiny, potentially dampening the rally.
Bitcoin’s recent surge is as much about political speculation as it is about market fundamentals.
With institutional investors piling into ETFs and prediction markets favouring Trump, it seems that traders are betting on a pro-crypto future under a Trump presidency.
However, with polls remaining tight, it’s crucial for investors to stay vigilant as the election unfolds. The next few weeks will be pivotal for Bitcoin, and for those with skin in the game, it’s time to buckle up.