The price of bitcoin, after rebounding from the $53,000 level almost two months ago, has scored a more than 30 percent rally, thus approaching its ATH. The rise in the cryptocurrency market has largely coincided with the start of the US presidential campaign, with less than a week to go. So let's take a look at how the upcoming election may affect the cryptocurrency market.
Table of contents:
- Huge bets on bitcoin
- The state of the cryptocurrency market
- How did bitcoin behave during the recent election?
- What bitcoin prices can we expect?
Huge bets on bitcoin price increases above $80k and $100k!
The options market is very specific in that it allows investors to set precise expectations about future asset prices. An option is a kind of bet that an instrument will rise or fall above or below a certain level within a set period of time. Currently, the largest number of bets in the market are on options to increase (call) the price of bitcoin above USD 80,000 or even USD 100,000 by the end of December this year. The number of call options is double the number of put options, suggesting that investors and hedge funds are betting heavily on the price of the cryptocurrency rising after the election, probably regardless of the outcome.
Source: Coinglas
The state of the cryptocurrency market
It is always important to keep a significant distance when analysing the cryptocurrency market. Of course, it is possible to forecast that the price of bitcoin will exceed a certain level in a week's time, but let's focus on hard data from the market to avoid wishful thinking.
Let's start with the question of whether there are still investors ready to bring new funds into this market, or whether all interested parties have already managed to buy in. We can indirectly assess this by analysing the capitalisation of stablecoins, which act as a quantity of money in this market. From this perspective, we have seen a continuous inflow of new capital for the last 12 months, although we are still below 2022 levels.
Source: Defilama
The introduction of ETFs earlier this year had a major impact on the bitcoin market. Since their debut, these funds have acquired more than $22 billion worth of bitcoin, a trend that has clearly accelerated in recent days. Currently, the funds already hold more than 3.3 percent of all bitcoin.
Source: Farside
How did bitcoin behave during the recent election?
In his election campaign, Donald Trump explicitly advocated the development and deregulation of the cryptocurrency market, which, in the event of his victory, could provide an additional boost to the price. However, let's take a look at how bitcoin has behaved during previous elections.
The history of bitcoin is not a long one, but analysing the last two election campaigns - 2016 and 2020 - we see that in both cases bitcoin did very well. In the 2016 election (Trump vs. Clinton), bitcoin gained 15.1 percent a month before the vote and another 8.4 percent a month after the election. The situation was similar in the 2020 election (Trump vs. Biden), when bitcoin rose by as much as 30.7 per cent the month before the election and another 35 per cent the month after. We seem to be following a similar path now, but we must treat these data with caution, as the sample is far too small.
Source: Conotoxia own analysis
What bitcoin prices can we expect?
As we have already mentioned, forecasting in the cryptocurrency market is extremely difficult due to its speculative nature and the intrinsic value of cryptocurrencies, which is difficult to determine. However, based on hard data, such as the dynamic inflow of new capital into the market, analysts at Invest.Cinkciarz.pl estimate that the probability of reaching new historical highs (ATH) by the end of the year is increasing, regardless of the outcome of the election. Donald Trump's win, however, could further strengthen investor optimism.
Grzegorz Dróżdż, CIIA, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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